Pre-Opening Wheat Market Report for 7/30/2010

December wheat was 9 1/4 cents higher overnight. The dollar was mixed to higher.

December wheat posted its third straight day of new highs for the move overnight as the world market continues to adjust to lost production in the Black Sea region and elsewhere.

Changes in policy are starting to emerge in areas most closely related to Black Sea production. Russia is showing increased concern over food inflation and has moved to sell strategic grain stocks into their domestic market and to curtail the export of feed wheat. Neighboring Ukraine has added export restrictions that are expected to curtail exports, and the region’s biggest customer,

Egypt, has eased its loading restrictions to allow sellers to load an individual cargo at more than one port. This latter move by the world’s largest importer is intended to allow a larger number of suppliers to compete in the Egyptian market in order to replace lost Russian supplies. The latest US Export Sales report also showed that Egypt booked US wheat in July for the first time in months.

The weather outlook in Russia remains hot and dry for the coming week as the winter wheat crops harvest continues and the spring wheat crop starts nearing maturity. Romania joined the list of country’s reporting lower wheat production yesterday. Their farm ministry projected that this year’s wheat crop at 5.8 million tonnes versus original expectations of 6.7 million. In contrast to Russia, these losses come from floods, hail and disease.

The International Grains Council (IGC) lowered 2010/11 world wheat production by 13 million tonnes yesterday to 651 million tonnes. This compares to 677 million in 2009/10. They cut wheat consumption by 3 million tonnes, due in large part to an expected sharp drop in feed wheat usage. The IGC expects world ending stocks to drop by 9 million tonnes to 192 million in 2010/11.

This week’s US export sales in wheat were above trade expectations and at the highest level in 6 weeks. Net sales were 919,900 tonnes. The list of buyers was very broad, led by Japan, Nigeria, the Philippines, Egypt and Canada. Sales need to average 420,000 tonnes each week to reach the USDA forecast.

December wheat spike higher yesterday taking that contract to its highest level since June 29th, 2009. Further gains overnight took December wheat to its highest level since June 24th. Japan bought 141,567 tonnes of wheat and Bangladesh issued a new tender for 50,000 tonnes of wheat.