December Chicago wheat was trading 5 1/4 cents lower near 7:00 am CST with KC and Minneapolis following. The November Matif Milling wheat contract is trading 0.50 Euros lower this morning. Chinese stocks were mixed overnight while European stocks had a weaker tone after the S&P downgrade of Spain. The Euro is trading slightly weaker against the US Dollar but some US commodities are trading positive this morning with crude oil and metals moving higher. Grain markets were mixed throughout the night with corn steady, wheat lower, and soybeans moved sharply higher ahead of this morning's USDA report.

For the USDA report this morning, traders will 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. It's also possible that the USDA may play with US wheat demand number as well. Feed and Residual use is currently projected at 220 million bushels and exports are pegged at 1.2 billion bushels. US exports are running nearly 12% behind the 5 year average of the pace needed to reach this goal so a marginal cut in exports is not out of the question. Traders believe all wheat ending stocks may be reduced by around 70 million bushels from the September estimate of 698. A cut in carryout would likely be a result of increased feed use.

Ukraine's Agriculture Ministry and local trade unions have agreed to increase the maximum volume of wheat that can be exported in 2012/13. The previous agreement was to set aside 4 million tonnes for export and the new agreement increased this by 1 million tonnes to 5. Russian officials also met yesterday to discuss their grain supply and export outlook and again, comments were made that suggest they have no plan on beginning any type of grain export restriction's going forward.

Parts of the western US plains remain dry and the areas that are in the worst shape include South Dakota, Nebraska, and northwestern Kansas. Good rainfall is expected to move through the areas by this weekend which should improve moisture deficits and help emerging wheat.


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