Pre-Opening Wheat Market Report for 8/12/2010
December wheat was up 14 1/4 cents late in the overnight session. The dollar was moderately higher. The December contract has traded in a relatively narrow range this week, sharply curtailing the volatility seen at the end of last week. Selling has been more concentrated in the new crop July futures with some of the evening up ahead of today’s reports coming in the form of unwinding of spreads according to traders. Pakistan can now be added to the list of countries that are expected to see a weather-related drop in wheat production this year. The loss in wheat is being pegged by some sources at just 500,000 tonnes at this point, but there may be some further disruptions at harvest time due to the evacuation of farm populations and some loss of transportation infrastructure. This is not a major event in terms of world wheat production, but it will trim Pakistan’s surplus in wheat at a time when countries around the world are growing more sensitive to the threat of food inflation. For example, while neighboring India has a large wheat and rice surplus, they have been reluctant to step up exports due to their own rising levels of inflation. One analyst noted that this may be indicative of a general worldwide trend in the direction of increased inventories of basic food commodities. Russia’s chief weather forecasters said today that dry weather will delay the sowing of winter crops in European Russia. He forecast some rain during the last 10 days of August but suggested that these would not be substantial, and that most sowing will be delayed until September. The USDA pegged Russia wheat production at 57.5 million tonnes in June and 53 million in July and traders look for a drop to near 45-48 million. Traders will be looking to see what the USDA does with its wheat and coarse grain numbers this morning. Most expect a significant downward revision with a further downward revision on subsequent reports. World wheat importers and brokers continue to make adjustments to the loss of Black Sea origin supplies. The USDA announced a sale of 120,000 tonnes of French wheat announced to Egypt yesterday along with a change in destination for 220,000 tonnes of wheat from ‘unknown’ to Egypt. In addition, Lebanon is tendering for 50,000 tonnes of wheat, Algeria is in the market for at least 50,000 tonnes and Japan bought 144,905 tonnes on its regular weekly tender. Analysts are looking for today’s Crop Production report was expected to show US all-wheat production for 2010/11 to be up about 15 million bushels from their July estimate of 2.216 billion bushels.