Pre-Opening Wheat Market Report for 5/18/2010

July wheat was 4 1/2 cents higher overnight. The dollar index was mixed to lower overnight following yesterday’s surge to a new 12 1/2 month high.
The wheat market continued its push down to the early April lows yesterday, although the pace of the down trend slowed. Traders said that wheat was supported by a lack of selling and some buying by funds and by spreaders versus corn. Traders indicate that weather is less of a factor in wheat than it is in corn and soybeans, especially with some scattered recent drying and expectations of warmer weather from the end of this week through early next week.

The USDA’s Crop Progress report showed spring wheat planting at 79% complete compared to 67% last week and 49% last year. The 10 year average for this time of year is 78%. The weekly Winter Wheat Conditions report showed 66% of the crop rated good/excellent compared to 66% last week and 48% last year. The 10 year average for this time of year is 47%. The highest percent rated good/excellent was 76% in 1993.

India’s weather department’s latest update on Monday indicated that monsoon rains could reach the SE Bay of Bengal by today with landfall on continental India possible within 2-3 days. This is near the normal time of the monsoon’s arrival with the June through September period being the heart of the monsoon season. Last year’s rains were the lowest in decades and this had a negative impact on production of rice, oilseeds and sugar. The Indian government has been actively assuring traders that this year’s monsoons would be nearer normal. They are very concerned that weather worries could bring food hoarding and destabilizing domestic food inflation. India’s Food Corporation, which is state run, said its purchases of wheat were down 3.6% between April 1st and May 16th versus the previous year while private purchases were higher. The U.N.’s food agency, the FAO, expects world wheat production to be down 1% this year over 2009/10 due to lower planted area.

This week’s export inspections for wheat were 12.5 million bushels, down substantially from 23.3 last week. Cumulative inspections stand at 93.7% of the projected export total for 2009/10 versus a 5-year average of 92.8%. Inspections need to average 20.2 million bushels each week to reach the USDA’s projection. The wheat market saw modest losses during the first half of the day session yesterday and then and traded in a narrow range just above the early lows into the close. The early weakness took the July contract to its lowest level since April 6th.

Traders said that the market’s attention is turning to the start of the winter wheat harvest, especially in the southern Plains. Excessive wetness in scattered areas of the soft red wheat belt is considered somewhat supportive although other areas are drying. Possible damage from hailstorms in Oklahoma over the weekend was also considered marginally supportive yesterday. Oklahoma conditions slipped to 67% good to excellent from 74% last week.