Pre-Opening Wheat Market Report for 6/18/2010

December wheat was 3/4 of a cent lower overnight. The dollar index was narrowly mixed.

Traders indicate that wheat fundamentals have gotten a bit more mixed over the past 1-2 weeks after months of relentlessly negative price news. The long term negative news consisted of continual growth in world production and ending stocks along with relentless export competition for the US from both the EU and Russia.

This seemed to culminate with reports last week of maxed-out storage in key areas of the southern Plains as the hard red winter wheat harvest advanced. However, over the past 2 weeks it has become clear that Canada will see big losses in acreage this year due to heavy rains that continued through the current week. Some recent delays in the hard red winter wheat harvest in the US may have added to the background support from Canada.

Sources in Argentina report that dry weather in some areas there is hampering late planting of wheat and they note that this could result in a loss of planted area in some regions. However, favorable conditions in other areas could allow planted area to be up 900,000 hectares from last year’s depressed levels to 4.2 million according to the Buenos Aires Grains Exchange. Wheat planting in Argentina is normally complete by mid July.

This week’s export sales were much better than expected, dominated by hard red winter wheat along with hard red spring and white wheat. Net sales were 959,500 tonnes and cumulative wheat sales stand at 21.0% of the USDA forecast for 2010/2011 versus a 5 year average of 19.0%. Sales need to average 381,000 tonnes each week to reach the USDA forecast.

In India, the late arrival of monsoon rains has contributed to a drop in the country’s main reservoirs to 12% of capacity from 17% the previous week. Japan says that it will loosen some of its shipping rules for wheat although this is not expected to impact demand.