Pre-Opening Wheat Market Report for 6/21/2010

December wheat was 6 3/4 cents higher overnight. The dollar index was moderately lower.

China’s decision to allow increased flexibility in its currency valuation sparked buying in financial and commodity markets overnight according to traders. However, wheat is thought to be less affected by these moves than corn or soybeans, since China is not a major importer of wheat.

State officials in Uttar Pradesh, India said last week that production there will be down for the just finished 2009/10 season due to very hot weather prior to harvest. This is India’s largest producing state and officials peg the crop at 27.8 million tonnes versus expectations of 30.0 million earlier this year. In addition, the start of the monsoon rains has been somewhat weaker than anticipated across India in June following widespread anticipation of a normal monsoon this year.

Saudi Arabia bought 990,000 tonnes of wheat on a previously announced tender with origins said to be from Canada and Germany. Argentina’s Agriculture Ministry released various crop data on Friday, including its planted area for the 2010/11 wheat crop. It raised its preliminary wheat area to 4.4 million hectares from a previous estimate of 3.52 million. India announced that it will export 50,000 tonnes of rice to Bangladesh on a government-to-government deal that comes despite a continued ban on commercial exports.

The Commitments of Traders report for the week ending June 15th showed mixed trade by funds. Trend-following funds were net sellers of 11,996 contracts to increase their net short position to a new record large total of 77,446. This is far and away the largest net short position held by these traders in any agricultural market. The Non-Commercial and Nonreportable combined traders held a net short position of 71,215 contracts. This represents an increase of 7,626 contracts in the net short position held by these traders in just one week. The combined spec and fund Net Short position is also a new record. Index funds were net buyers of 4,451.

Harvest continued in the Plains and in the soft red winter wheat belt over the weekend.