December Chicago wheat was trading 1 cents lower near 7:30 am CST and losses were similar in the KC with Minneapolis. The November Matif Milling wheat contract is trading slightly lower near 259.75 Euros this morning. European markets were higher overnight and the Euro rose near a 2 week high against the US Dollar after the ECB reassured investors around the world that they were ready to buy bonds of distressed member countries. The BOJ announced no policy or stimulus action in their meeting, which was expected by traders. Gold, Crude Oil and Grains are all weaker this morning as investors look ahead to the release of the US Monthly Payrolls Report.
December Chicago wheat finished yesterday lower despite a sinking US Dollar and a surging crude oil market. The stronger trade early on for corn and soybeans helped support but gains eroded near the close which suggested a slightly bearish bias for the overnight session. Volume continues to be unusually light with only 57,883 contracts trading yesterday and open interest declined by 200 contracts. December Chicago wheat continues to trade in a wide, sideways range from 850-920 with no catalyst to trigger a breakout either way at the moment. Export sales remain week and more favorable weather conditions for planting are offering a bearish bias. Support continues to come from feed usage as it narrows its premium to corn.
As of the week ending September 27th, cumulative export sales were 40% of the USDA forecast vs. the 5-year average of 55%. The 4-week average sales pace is 401,000 tonnes per week which is 155,000 tonnes shy of what is needed each week to reach the USDA forecast of 1.2 billion bushels. The data shows that US wheat prices are overpriced in the world market and without a significant increase in sales to the Middle East or North Africa, the USDA may need to cut the US export estimate sometime in the 4th quarter. It was also announced overnight that Saudi Arabian buyers purchased 330,000 tonnes of feed barley which will likely be sourced from Argentina and Australia. The shipment period was from December through January and prices ranged from $335 to $340 cargo and freight included. Increased use of feed barley by international buyers could add pressure to wheat in the long term.
Winter wheat planting has been underway in the Black Sea region and it is estimated that farmers in Ukraine have sown 5.7 million hectares as of October 4th or nearly 70% of its total forecasted area. Out of the total planted winter grain, it is estimated that 5.15 million hectares of that is winter wheat. Weather conditions in Ukraine and Russia turned more favorable in August and September, much like the United States. However, areas of the Volga Valley in Russia remain drier than normal and this could affect total planted acreage before winter sets in. Better rainfall is expected for Black Sea winter wheat growing regions next week.
Weather patterns for US wheat growing regions look favorable for the middle of October with soaking rainfall expected to reach areas of the western plains which should benefit planted wheat and stabilize soil moisture levels. This could pressure July and August KC and Chicago wheat contracts if the forecast is correct.
*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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