Pre-Opening Wheat Market Report for 7/28/2010

December wheat was 13 cents higher overnight. The dollar was again narrowly mixed.

Continued drought in Russia has brought increased fears that wheat exports from the Black Sea region could be curtailed this year. While there are no indications that official restrictive measures will be taken by the Russian government, ideas that total Russian wheat exports could fall by half this year are becoming more widespread this week. With food inflation already on the rise in Russia, one analyst notes that measures to curtail exports and divert cheaper government stocks into the domestic market may become inevitable.

Milling quality wheat hit new highs in Europe overnight and this contributed to a surge in Chicago that took the December contract back to last week’s high. Conditions in North America remain favorable, although rains have caused some scattered delays in the last of the winter wheat harvest.

Forecasts continue to call for the continent’s warm air mass to shift to the west tomorrow bringing drier conditions to remaining unharvested areas which will be welcome. The warm air is also expected to push north into parts of the Canadian Prairie which would be very beneficial to the spring wheat crop there.

The USDA will release its Export Sales report tomorrow morning, and traders will be looking to see how the rally in futures is affecting export demand. Sales have softened somewhat over the past few weeks. Sales need to average 430,500 tonnes each week to reach the USDA’s export projection for the 2010/11 crop marketing year.