Pre-Opening Wheat Market Report for 6/28/2010

December wheat was 2 1/4 cents lower overnight. The dollar index was narrowly mixed near its recent lows.

December wheat pushed out of its narrow trading range to the downside on Friday and moderate selling pressure continued overnight. Wheat had been the price leader among grains for most of last week, and traders suggested that this was due to background support from lost acreage in Canada and a soft tone in the dollar as well as the fact that funds are heavily short.

The latest Commitments of Traders report for the week ending June 22nd did show short covering by trend-following funds. They were net buyers of 10,548 contracts in that week to reduce their huge net short position to 66,898 contracts. The previous week’s net short position by these traders was a record large, and it remains the largest net short position held by trend-following funds in any agricultural market. Index funds were net buyers of just 576 contracts.

Warm weather over the past week was considered beneficial to both the hard and soft red winter wheat crops with welcome dry conditions prevailing in much of the mid south and just north of the Ohio River in the Midwest. However areas to the north were wet and this is where the harvest is getting underway. The Plains were dry in southern Kansas, but northern Kansas and Nebraska were wet.

Dry conditions are expected across virtually all of the Plains north of Texas and the Midwest this week and that is considered very beneficial for harvest and late ripening of the winter wheat crop. Spring wheat areas are also expected to be dry and this is also considered beneficial. Wheat growing areas in Canada are expected to be dry to start the week with scattered light showers moving in at mid week and light to locally heavy showers later in the week.

Black Sea wheat exporters have reportedly sold feed wheat to feed mills in SE Asia recently.