September Chicago wheat traded sharply lower overnight after failing to test yesterday's contract highs and was down 11 1/4 cents near 7:30 cst. Kansas City and Minneapolis wheat are lower but continue to hold gains against Chicago wheat. Wheat bulls took profits after corn slipped lower. The November Paris Matif contract is trading 4.75 Euros lower this morning near 261.50. Outside markets are not helping grains this morning with stocks trending lower and the US Dollar sharply higher after testimony by Federal Reserve Chairman Ben Bernanke offered no evidence of further monetary easing yesterday. Chicago wheat fell from it's high at $8.87 overnight following a day that saw the Kansas City September contract trade just over $9.00, and Minneapolis September broke through the $10.00 level. The bulls were unable to follow through at these levels which triggered profit taking overnight and this morning. Many traders see Chicago wheat as overbought and well overpriced when looking at its fundamental makeup. The US is finishing up a successful wheat harvest and demand remains poor. The only bright spot in the domestic wheat balance sheet is a positive outlook for feed wheat demand and possibly increased export business in the second half of the crop year. US weather and corn conditions remain the driving force in the wheat market. A continuation of warm and dry US weather continues to force US corn yields lower and promotes a greater use of feed wheat in the coming year. A higher short term trend for corn will mean a continuation of the rally in wheat. The international production concerns remain headline items and a well-known Russian agricultural consultant expects Russian wheat exports to fall near 10 million tonnes which would be 2 million tonnes lower than the July WASDE report and 6 million tonnes lower than the June WASDE projection. The market also expects Russian wheat production to fall near 45 million tonnes, or 4 million tonnes lower than the current USDA estimate. The market also needs to monitor the weather patterns and production outlook for Australia. The country is currently projected to produce 26 million tonnes, which was unchanged from the June WASDE and export 20.50 million tonnes. Cooler than normal weather conditions recently mixed with a developing El Nino year could drastically reduce production. Current climate projections show that wheat growing regions in Australia have a 30-40% chance of exceeding the median rainfall in the August to October timeframe, which is right in the middle of wheat heading and the beginning of harvest. If El Nino develops, the drier than normal conditions could reduce production estimates by as much as 3-5 million tonnes and reach levels not seen since 2008/09. Removing another 10 million tonnes of world production between Australia and the Black Sea would leave ending stocks at levels not seen since 2008/09 and drop the stocks to usage to near 25%, which is near a 5 year low. Production decreases in Australia could provide the US with the opportunity to increase sales of feed wheat into Asian markets off the PNW.
Join the Discussion