September Chicago wheat is trading 5 1/2 cents higher near 7:30 am CST. Kansas City and Minneapolis are trading higher as well. Wheat markets were supported from gains in corn but underlying support from uncertainty in the Black Sea is offering a positive tilt to the market. Worse than expected corn yields from a crop tour yesterday was supportive to the overnight trade. European markets and the Euro open stronger overnight on optimism over Greece's financial outlook and on hopes that the ECB will begin purchasing sovereign bonds to stabilize the Eurozone. The US Dollar traded weaker overnight which lent support to US commodity markets. Chicago wheat followed corn higher overnight as US corn yields continue to disappoint across the Midwest. Updated harvest reports out of Russia suggest that grain yields have fallen 27.5% from last year to 1.98 tonnes per hectare. As of August 20th, 54% of the Russian harvest is complete according to the Russian Agriculture Ministry. Furthermore, yields in Siberia are likely to fall by close to 20% from last year. Siberia is often a contributor of 20-22% of the national wheat production for Russia and the high grade milling wheat is primarily used in flour production for neighboring areas and nearby cities. The recent surge in domestic wheat and flour prices, due to the sharp decline in this year's wheat production has traders wondering if Russia will limit exports at some point this year.

Australia continues to trend drier this week with rainfall to date only 20% of normal levels for some areas. Some forecasts suggest a full blown drought will not occur due to the slightly weaker El Nino outlook; however soil moisture conditions at the beginning of the growing season are well below normal and moisture will be needed soon. Southeastern Australia is fairing much better than the west. There is still time for drier areas to benefit from rainfall but there is also just as much risk that the dry pattern persists through September and into October, the critical growth stage for their wheat crop. Weak to moderate El Nino patterns have a history of slashing Australian wheat production drastically. For example, in 2002/03, a weak El Nino cut wheat production from 24.3 million tonnes to 10.1 million tonnes.

The weekly Spring Wheat updated showed that 79% of the crop is harvested compared to 65% last week and 25% last year. The 10 year average for this time of year is 47%. Winter Wheat is 97% complete compared to 94% last week and 92% last year. Weekly export inspections for the week ending August 16th came in at 23.4 million bushels vs. 22.2 the week prior and 23.9 million bushels are needed each week to meet the USDA estimate. Export inspections for the 2012/13 marketing year now sit at 17.8% of the current USDA estimate vs. the 5 year average of 20.7%