September Chicago wheat traded slightly lower for most of the night but fell sharply lower near 2 am CST. The September contract was down 20 cents near 7:30 am CST. Kansas City and Minneapolis wheat are following Chicago lower. Comments made by Russian government officials yesterday and this morning regarding adequate domestic wheat supplies has triggered profit taking by funds in Chicago wheat. Outside markets are weaker this morning after Chinese and Eurozone PMI data disappointed investors. Europe's manufacturing sector contracted for the 11th straight month. The US Dollar is trading slightly lower, crude oil is higher, and US stocks are set to open up marginally higher this morning. Chicago wheat has come under considerable pressure this morning following bearish news out of the Black Sea and profit taking from, near record, fund long positions. While the wheat balance sheet in the long term outlook looks friendly due to production disturbances around the world and higher than expected feed wheat demand, the short term outlook is contingent on corn and downside moves in wheat will likely be over-exaggerated due to fund positions. Russian officials have released numerous comments in the last 48 hours that have forced traders to take profits even if the weather outlook for Russia and Ukraine continues to look worrisome and detrimental to wheat production. Yesterday, Russia's Agriculture Ministry said they may cut it's 2012 grain crop production forecast to 75 million tonnes from it's current estimate of 80 million tonnes. Soon after, the Prime Minister of Russia said he did not expect a domestic deficit for grain despite the lower production estimates signaling an adequate supply in domestic stocks. Surging wheat and flour prices suggest this is not the case but the region continues to sell export business due to their freight advantages to the Middle East and the un-competiveness of US wheat currently. Jordan announced a purchase 100,000 tonnes of wheat from their tender issued last week. The official origin is unknown, but traders believe the seller likely came from the Black Sea region. Algeria announced a purchase of 400-500,000 tonnes of milling wheat and France was seen as the likely seller. Russian government sources are also suggesting this morning that the country will have an exportable surplus of 11-15 million tonnes and the 2012 wheat crop production could reach 50 million tonnes. Both estimates seem extreme given the weather conditions since last fall and market expectations. The USDA currently has Russian production at 49 million tonnes and exports at 12 million tonnes. Many traders believe the USDA will revise Russian wheat production lower in next week's USDA report but it is unlikely a revision will be made less than 45 million tonnes. The bearish comments made by Russian officials mixed with the large purchase of wheat made by Algeria has likely temporarily thrown a wet blanket over the bull market run and has forced traders to take some profits and move to the sidelines for now. The French Farm Ministry also raised it's estimate of their soft wheat crop to 36.7 million tonnes vs. 35.9 million tonnes in their last estimate. Recent rainfall in France has likely caused quality downgrades for parts of the wheat crop.
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