Pre-Opening Wheat Market Report for 5/20/2010

July wheat was 2 cents lower overnight. The dollar index was mixed to higher.

The wheat market remains under pressure from ample world supplies and the lower Euro. Weakness in the Euro has further boosted the competitive advantage of European wheat in the key markets of the Mediterranean Basin and Middle East, and that is viewed as a long term negative factor. This has kept the July wheat contract in a very narrow range this week at just above contract lows.

Traders said that sell orders continue to dry up as the market presses toward the lows. This is credited to light sales in the cash market as well as the fact that trend-following funds continue to hold a large net short position.

The USDA will issue its weekly Export Sales report this morning and traders are looking for old and new crop sales combined to total as high as 550,000 tonnes. Old crop sales need to average 342,700 tonnes each week to reach the USDA’s current export forecast for 2009/10. It has consistently fallen below that average for the past several weeks.

Japan bought 147,000 tonnes of wheat on its regular weekly tender. An Iraqi official said yesterday that he expects Iraq’s 2010 wheat production to hit 2.5 million tonnes due to timely rains this year. This is expected to reduce their wheat import needs to about half of total usage during the 2010/11 crop marketing year. He added that Iraq hopes to stop importing wheat altogether by late 2014.

In yesterday’s action, the July contract made a new low for the week, but finished marginally higher on the day. KC wheat gained on Chicago amid light cash trade as harvest continues in the southern Plains. Showers moved through parts of the south central Plains overnight and the northern Plains and Canadian Plains may see moderate rains into tomorrow.