Pre-Opening Wheat Market Report for 7/29/2010

December wheat was 10 3/4 cents higher overnight. The dollar was moderately lower, making a new 3-month low in the process.

Concern over the drought in Russia continues to grow with hot and dry weather now expected to extend into the next week to ten days there. Expectations of reduced Russian wheat exports and potential sharp reductions in the export of feed wheat and other feed grains this fall have added fuel to the rally in wheat this week according to traders.

Private forecasters continue to lower the overall grain production forecast for Russia with some now falling below 75 million tonnes to as low as 70 million. Other private forecasters are also calling for a drop in total wheat exports to 10 million tonnes or lower. The USDA’s July estimate of Russian wheat exports for 2010/11 was 15.0 million tonnes. This is down from 17.5 million in 2009/10 and 18.39 million tonnes in 2008/09.

In addition, Ukraine is setting up new export controls for wheat that some traders believe has the potential to halt exports. China is feeling some of the effects of the rally in wheat with higher prices seen there in recent weeks despite expectations of a 2010/11 crop near last year’s levels. The government has warned against the hoarding of grains, although this is thought to be a greater concern for corn than it is for wheat.

This stands in contrast to very favorable conditions in the US spring wheat belt where a major crop tour is expected to wind up today. In addition, India has announced that it will allow the export of 300,000 tonnes of wheat and rice to Bangladesh and Nepal.

December wheat posted substantial gains yesterday which pushed the December contract to its highest level since December 1st, 2009. Further gains overnight pushed the December contract to near its November high at 659 3/4.

Egypt said yesterday that it will allow France to load individual wheat cargos at two ports, if the shippers pay for added freight costs. France had previously been restricted to loading at one port in order to facilitate maintenance of Egypt’s stricter quality standards. Morocco is tendering for 140,000 tonnes of US durum wheat.