Pre-Opening Wheat Market Report for 4/8/2010
July wheat was 4 3/4 cents lower overnight. The dollar index was higher.
July wheat rallied to the highest level since July 23rd yesterday, and traders credited the sharp advance to short covering. Trend-following funds are holding a record large net short position and that has added to ideas that this week’s advances are based mainly on short covering.
However, other traders note that the rally may have been sparked by export demand. Trade sources announced on Tuesday that Iraq had bought 500,000 tonnes of wheat including a small amount of US hard red winter wheat. This was followed by reports yesterday that Saudi Arabia is in the market for 550,000 tonnes of wheat. While this does not necessarily mean that the US will benefit from this demand, it may have set off a chain reaction of buying in various markets around the world, including cash markets. In addition South Korea is reportedly in talks to buy 300,000 tonnes of wheat from Kazakhstan, Japan bought 157,000 tonnes of wheat on its regular weekly tender, Tunisia is tendering for 92,000 tonnes of soft wheat, and traders also report that Kazakhstan sold 20,000 tonnes of wheat to China.
Unwelcome rains are moving east into the eastern Midwest and SE today and this should be followed by a welcome dry spell in most soft red areas that could last into next week. The USDA will issue its weekly Export Sales report this morning. Sales need to average just 138,100 tonnes each week to reach the current USDA export projection for 2009/10. Traders expect this week’s sales to be 2-3 times the average needed.
The USDA will also issue its monthly supply and demand report on Friday. Traders do not expect many changes to the 2009/10 numbers, although there is a chance that the export total could be raised slightly on this report or a subsequent report. Good rains in wheat growing areas of Australia recently have prompted some forecasters there to raise their projections for the 2010/11 wheat crop.