Pre-Opening Wheat Market Report for 8/10/2010
December wheat was 7 3/4 cents lower overnight. The dollar was higher for the second day in a row. Wheat continued to slide overnight as the dollar continued its modest recovery from last Friday’s new low for the move. However, the December wheat contract did manage to hold above yesterday’s lows overnight. The world wheat and feed markets continue to adjust to the ongoing Russian drought. Forecasts indicate that there is no significant rain in sight in affected areas which is expected to bring continued losses in spring grain crops. The Russian government said yesterday that it would honor existing export contracts, although it is not certain whether this applies only up to the start of the ban on August 15th. The state grain exporter, United Grain Company, said that it intends to honor all contracts before the ban sets in, but some shippers have said that there is not enough grain in position to fulfill all contracts in that short time span. Others note that export capacity at major loading points may also fall short of the amount needed to honor all existing contracts. Sources indicate that 300,000 tonnes are currently in exportable positions near Black Sea ports while another 300,000 tonnes are en route to those ports. Adding to the difficulties in Russia is the growing realization that soil in most winter wheat areas is far too dry to plant next year’s crop. There is still time for a shift in weather to bring enough rain for a favorable planting season, but one analyst indicated that this would require a complete reversal of current weather patterns. He added that if the winter crop is sharply curtailed this year, the ban on exports would likely be extended well into 2011. Prime Minister Putin said yesterday that there was no guarantee that Russia’s current ban on exports would not be extended past the December 31st end point. He said that the government had to assess losses which could drop the overall grain crop to as low as 60 million tonnes from the latest estimate of 65 million by the Agriculture Ministry. Traders in Ukraine report that a lack of availability of rail cars along with extra customs checks for grain is giving the appearance that Ukraine is undertaking a slowdown in grain exports. Bulgaria upped its estimate of its 2010/11 wheat crop yesterday to 3.6 to 3.7 million tonnes today. A recent estimate had put the crop at 3.5 million tonnes versus 4.0 million last year. In addition, Jordan announced today that its wheat purchases are the equivalent of 6 months of usage. This follows last week’s announcement by Egypt that it has six months of usage already on hand. This week’s (US) export inspections for wheat were 14.248 million bushels, down from 22.991 million last week. Inspections need to average 19.522 million each week to reach the USDA’s export forecast for the 2010/11 crop marketing year. The US Spring Wheat Harvest is 20% complete compared to 5% last week and 7% last year. The 10 year average for this time of year is 25%. The weekly Spring Wheat Conditions report showed 82% was rated good/excellent compared to 82% last week and 72% last year. The 10 year average for this time of year is 59%. The weekly Winter Wheat Harvest report showed 87% complete compared to 83% last week and 89% last year. The 10 year average for this time of year is 93%.