Pre-Opening Wheat Market Report for 8/2/2010
December wheat was 26 1/4 cents higher overnight. The dollar made a minor new 3-month low overnight. Searing temperatures of over 100 degrees in Russia have brought ideas of further reductions in yields there, especially for spring wheat. This is setting off a scramble by wheat importers to cover unmet needs and by exporters in the Black Sea region to curtail exports and dampen domestic food inflation. Sources in Australia indicate that this is now causing importers from the Middle East to start locking in long term contracts for Australian wheat. Crop prospects there continue to be favorable with La Nina expected to bring normal to above normal rains to some areas. Egypt showed up as a buyer of US wheat on last week’s Export Sales report for the first time in many months and Brazil also showed up as a significant buyer. Brazil is the world’s second largest importer of wheat, and they have diverted some of their sourcing from Argentina to Russia over the past year. They too must now find other sources for wheat. December wheat closed up $1.87 1/4 for the month, up 36.9%. The Foreign Agriculture Organization of the UN suggested late last week that its world wheat production and ending stocks forecasts for 2010/11 could drop by 10-15 million tonnes or more from its June forecasts. Private forecasters in Germany are confirming crop losses there with one calling for a drop of between 1.2 and 2.2 million tonnes this year. In overnight action, the December wheat contract surged above 7.00 for the first time since June 12th, 2009. This followed an even bigger surge on Friday that traders attributed to the ongoing effects of the drought and heavy buying by funds, spreaders and commission houses. The Commitments of Traders report for the week ending July 27th showed that trend-followers (managed funds) were net buyers of 6,759 contracts to decrease their net short position to 15,432. These traders had been net short by over 77,000 contracts as of June 15th. Index funds were net sellers of 801 contracts.