Pre-Opening Wheat Market Report for 6/16/2010

December wheat was 2 cents higher overnight. The dollar index was moderately higher overnight.

The wheat market continued to hold its recent gains overnight despite a modest rally in the dollar. This comes as traders are paying more attention to recent wetness in the south central Plains and in the southern Midwest. However, the forecast through Saturday calls for scattered light showers in most of the hard red winter wheat belt which should help the drying process in Oklahoma and Kansas. Continued heavier rains are expected in the southern Canadian Plains into Friday. A small system of moderate to heavier rains could move across parts of Iowa, northern Illinois and Indiana and on into parts of Ohio on Saturday and Sunday.

Argentina’s agriculture minister said yesterday that recent rains in wheat producing areas there could increase wheat production to as high as 15 million tonnes. An increase of 1 million hectares in the area planted to wheat is also expected to also boost production. The USDA currently projects the 2010/11 Argentine wheat crop at 12.0 million tonnes, up from 9.6 million tonnes in 2009/10. The planting season in Argentina is well advanced and it typically ends in mid July.

Saudi Arabia’s water and electricity minister said yesterday that wheat producers are moving more rapidly than anticipated away from water-intensive crops there. The country had originally announced a plan in 2008 to phase out wheat production altogether by 2016. Bulgaria’s agriculture minister says that good weather should allow this year’s wheat crop to match the 4.0 million tonnes produced last year, despite a drop in planted area. This should allow the country to export 1.5 million tonnes according to the minister.

Growing conditions in the Former Soviet Union continue to be mostly favorable, although conditions are somewhat dry in the Urals region of Russia. A lower dollar and delays in the US winter wheat harvest were considered supportive forces to the market yesterday. Traders also noted that buyers are reluctant to step into the wheat market after the recent 2-week slide into new contract lows. The USDA announced a sale of 128,080 tonnes of wheat to an unknown destination yesterday morning.