Pre-Opening Wheat Market Report for 5/6/2010

July wheat was 4 1/2 cents lower late overnight as the dollar index made another new 12-month high. Deliveries against the May wheat contract totaled 357 contracts this morning with the total for the delivery period so far at 3,330.

The July contract continued to push higher yesterday, finishing the session just below the key 100-day moving average. That average sits near 517 1/4 this morning. Another jump in the dollar overnight is credited with pushing wheat prices lower, but many traders continue to express surprise that wheat prices have held on the firm side this week despite a sharp rally in the dollar.

Wheat is thought to be especially vulnerable to dollar rallies since US wheat is already at a competitive disadvantage when it comes to price in many key import markets, and a higher dollar only increases that disadvantage. This was demonstrated again yesterday when Iraq bought 250,000 tonnes of wheat, with none of it coming from the US. The USDA will release its latest weekly Export Sales report this morning. Traders are looking for an improved total after three straight weeks of disappointing sales with estimates running up to 400,000 tonnes. The weekly average needed to reach the USDA’s wheat export projection for 2009/10 stands at 291,800 tonnes.

Wet weather is expected in the spring wheat belt in the US starting overnight with moderate to locally heavy rains expected to move across the northern soft red wheat belt tomorrow and into Saturday. Scattered light rains are expected elsewhere in the Midwestern soft red belt. The Kansas wheat tour is expected to release its results in Kansas City today. Traders have been expecting tour members to peg yields there at a multi-year high but results on the 1st day of the tour were thought to be disappointing as far as yield is concerned.

India plans to keep its ban on wheat exports intact despite the fact that a record harvest has sent government stocks soaring. Some sources believe that the government may wait until monsoon rains are ending in September before lifting the ban due to fears of domestic food inflation.