December Chicago wheat was trading 3 1/2 cents higher near 7:45 am CST with KC and Minneapolis following. The November Matif Milling wheat contract is trading 1.25 Euros higher this morning. European markets fell overnight which pushed the Euro lower. Outside markets have reversed course this morning and the US Dollar has turned lower and stocks are set to open up in positive territory. Gold, silver, and copper had a softer tone overnight but are now trading off session lows and gold is actually higher on the day. Crude oil has also erased overnight losses and is trading higher this morning. The wheat market was steady in light volume overnight ahead of tomorrow's USDA report.
Chicago wheat saw positive trade in the overnight session for the second day in a row, in very light trade. Volume yesterday was recorded at 46,491 contracts and open interest rose by 273 contracts. Light speculative buying interest has been prevalent all week after December Chicago wheat bounced higher from just above 850 level on Monday. The low volume trade this week is likely due to indecision on where wheat prices need to go from here until the USDA Supply and Demand report is released on Thursday. US wheat remains uncompetitive in the global market and recent gains, along with the rising US Dollar continues to weaken any chance of doing any significant export business.
The weekly Winter Wheat Planting report showed 57% of planting was complete compared to 40% last week and 53% last year. The 10 year average for this time of year is 62%. The highest percent complete was 72% in 1987 while the lowest was 48% in 2000. The Kansas, Oklahoma, and Texas planting pace is trending above the 5 year average while Nebraska and South Dakota are falling behind the pace. South Dakota is only 67% planted vs. the 5 year average of 82% due to drier than normal conditions. Winter wheat emergence was pegged at 23% vs. the 5 year average of 30%. Montana, Nebraska, and South Dakota continue to fall well behind the 5 year average emergence pace with South Dakota at 8% vs. 49%, Montana at 14% vs. 35%, and Nebraska 31% vs. 62%. Wheat growing areas in the western plains are expected to see steady rainfall later this week and into the weekend which should help soil conditions and emergence.
Wheat markets found a bit of bullish news overnight after the French Farm office cut its estimate for French soft wheat stocks to 1.8 million tonnes, which was down 600,000 from their September estimate and the lowest level in 13 years. The cut in ending stocks is bullish for the Paris Matif Milling wheat complex however the news can be construed as slightly bearish for US wheat market since the cut was made due to an increase in non-EU exports for 2012/13 to 9.5 million tonnes against 9 million last month. France has become the cheapest wheat in the world and has stepped in to supply Middle Eastern countries ever since Russian prices have risen dramatically the last 2 months. The Matif Milling wheat market reacted positively to the news but remains range bound, much like Chicago wheat.
Heading into the USDA report tomorrow, traders will likely keep a close eye on cuts in production for world exporters and the impact those cuts will have on world ending stocks. World ending stocks for 2012/13 are estimated at 176.71 million tonnes and most in the trade estimate the report will show ending stocks just under 173. Traders anticipate cuts in production of 2-4 million tonnes in Australia and the USDA currently has the crop pegged at 26 million tonnes. India continues to export wheat and exports are projected at 4.5 million tonnes. It is possible that the USDA may increase their export estimate by 1-1.5 million tonnes due to their bulging domestic stockpiles and aggressive stance on exports this season. The USDA estimates Russian wheat production at 39 million tonnes but recent private analyst estimates along with a revised estimate by the Russia Agriculture Minister have opened the door to a slight increase in their production to 40 million tonnes.
*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.
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