December Chicago wheat was trading 1 cent lower near 7:00 am CST. Kansas City wheat was slightly lower while Minneapolis saw modest gains. The January Matif Milling wheat contract traded 0.75 Euros higher overnight. Asian equity markets were lower across the board and US stock futures are set to open up weaker. The US dollar is trading modestly higher against the Euro as investors await the release of the US Q3 GDP which will likely set the tone for the markets today. Grains are weaker across the board as energies and metals sink.
Better than expected export sales favored the bull camp yesterday but weaker action in the corn and soybean market helped to limit gains. Chicago wheat held up rather well against the significant losses in corn as the outlook for better global demand for US wheat continues to add a supportive tilt to the market. Volume backed off a bit yesterday to near 92,200 contracts and open interest increased by 1,964 contracts.
Export sales were friendly yesterday with 572,000 tonnes reported and sales were the highest since July 12th of this year and the 4th highest for the crop year. US soft red winter wheat in the Gulf of Mexico remains a $10-15 per tonnes premium to French wheat. The EU granted export licenses for 242,000 tonnes of soft wheat yesterday which took the total since the beginning of this crop year to 4.9 million tonnes vs. 4.5 million cleared in the same period last year. New export business is slow at the moment with Japan tendering for feed wheat and Syria is back in for 100,000 tonnes for November 12th. Iraq postposed their tender for 50,000 tonnes for next week due to holiday. Two state-run Indian exporters have tenders for export wheat offered to the market that amount to 325,000 tonnes of wheat. Egypt has been absent from the market this week and traders await news as to if stranded cargos in Ukraine will be switched to EU or US origins following their announcement of a ban on wheat exports on November 15th. Russia exports will likely be a non-factor for the rest of the crop year and it's being reported that their wheat production is at 39.6 million tonnes as of October 23rd with harvest 98% complete.
The October 23rd NOAA US Drought Monitor continues to show "Severe to Exceptional" drought conditions in areas of the western to northwestern plains. South Dakota, Montana, Nebraska, Colorado, and Kansas accounted for 43% of the total winter wheat production in 2012/13. As of October 21st, total winter wheat emergence is running 49% vs. the 5-year average of 56%. Kansas is keeping up with its 5-year average pace, however other states have a substantial amount of work to do before winter dormancy sets in. Colorado is behind by 16%, Montana 31%, Nebraska 29%, and South Dakota a whopping 67%. The extremely dry conditions, mixed with dramatic swings in temperatures, have begun to impact germination which could have a dramatic impact on yield potential next spring.
The Dow Jones-UBS Commodity Index is adding Kansas City wheat futures to its index with a weighting of 1.32% of the total holdings which might amount to near 23,000 contracts. At the same time, the index will be cutting Chicago wheat holdings by 1.5% with some estimates near 55,000 contracts. The changes are expected to take place in early January.
*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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