Pre-Opening Wheat Market Report for 6/29/2010

December wheat was 7 cents lower overnight. The dollar index was substantially higher.

The erosion that started in wheat on Friday continued yesterday and overnight, despite limited volume on breaks and ideas that trend-following funds may continue to be in a short covering mode. Forecasts continue to be dry into this weekend in all areas of the US hard and soft red winter wheat belts that still remain to be harvested. This is alleviating concerns over quality in soft red areas that had been growing in recent weeks.

Hard red yields are said to be good in Kansas where the hard red harvest is currently concentrated, although some sources report protein levels slightly below last year. Dry conditions and mild temperatures are also expected in spring wheat areas of the northern US Plains into this weekend, and that is also considered favorable. However, unwelcome rain is expected in the Canadian Prairies into mid week with some locally heavy totals possible.

The USDA’s latest weekly Crop Progress report showed Spring Wheat Conditions at 84% good/excellent compared to 84% last week and 76% last year. The 10 year average for this time of year is 69%. The winter wheat harvest is 38% complete compared to 17% last week and 33% last year. The 10 year average for this time of year is 44%. This week’s US export inspections for wheat were 16 million bushels, up from last week’s total of 13.4 million. Inspections need to average 17.4 million bushels each week to reach the USDA’s export projection.

India reports that government purchases of wheat are down 8.7% from last year for the April 1st through June 27th period. This is due to an ongoing lack of storage space. Egypt’s latest purchase of wheat totaled 120,000 tonnes and it was reportedly all of Russian origin. This brought comments from the country’s biggest buyer, GASC, that the country would like to diversify its sources for wheat, but that low prices from the Black Sea are simply making US and French wheat less competitive. Egypt is the world’s biggest buyer of wheat and the US has been shut out of most business with the country since last year. Bangladesh is tendering for 100,000 tonnes of wheat.