Pre-Opening Wheat Market Report for 5/19/2010

July wheat was 1/4 cent lower overnight. The dollar index made yet another new 1-year high.

The July wheat contract has pushed down near the early April lows over the past few trading sessions with traders crediting the weakness to a variety of factors including the start of the US winter wheat harvest, a favorable crop outlook, soft export demand and risk aversion stemming from the ongoing debt crisis in the Euro-zone.

Weather in the far southern Plains continues to be favorable for the early harvest although heavy rains today in the central and south central Plains are unwelcome as the crop there nears maturity. Initial yields have been considered strong in the southern Plains with lower futures helping to keep cash markets steady so far. Drier weather is expected in the northern Plains into tomorrow and this will be beneficial to planting and other field work.

The USDA will release its weekly export sales report tomorrow. Sales need to average 342,700 tonnes each week for the remainder of the marketing year in order to reach the USDA’s export projection. The actual sales total has fallen short of the average needed for the past several weeks in a row, and this has caused the average needed to rise from just 260,000 tonnes in early April to the current total of 342,700. In yesterday’s action, wheat rallied early but sold off and then made a new low for the day and for the week later in the session before finishing near the lows.

State radio in China reported today that the government expects this year’s wheat crop to come in at better than 110 million tonnes, about the same as last year. The latest USDA estimate of China production for 2010/11 is 112 million tonnes. Algeria has confirmed recent trade reports that it bought 500,000 tonnes of wheat from Europe, and it indicated that it did so in response to the recent sharp drop in the Euro.