September Chicago wheat is trading 9 cents higher near 7:30 am CST. Kansas City and Minneapolis are trading sharply higher as well. Wheat is seeing follow through support from yesterday's surge in prices. Chicago wheat saw sharp declines earlier this week and short covering continues to take place. The November Matif Milling wheat contract is trading 1.75 Euros higher. European and Asian markets had a positive tilt following comments made by Germany's Chancellors that suggests she supports the ECB's intervention in the bond market to stabilize their debt crisis. The Euro bounced on the news and German bonds subsided. The US Dollar is slightly lower this morning which is supportive to commodities. Chicago wheat continued it's march higher overnight and extended it's gains this morning. The supportive trade continues to stem from increased fears that Russian wheat supplies are at low enough levels that some type of government action will force exports to slip this winter or early in 2013. Wheat volume yesterday was 84,636 contracts which was slightly lower than Wednesday's trade and open interest increased by 2,305 contracts. Russia continues to be the center of attention and the sharply higher trade suggests risk premium is needed in prices. Below normal yields and an exceptional export sales pace continues to support domestic flour prices in Russia. The USDA recently cut Russian exports for 2012/13 to 8 million tonnes from 12 million tonnes. Russia exported only 4 million tonnes in 2010/11 after drought forced their government to halt exports. Major importers have other supply options in the Black Sea, like Ukraine, but current wheat production estimates of 15 million tonnes for Ukraine may be overstated and some analysts suggest Ukraine will only produce 13 million tonnes or less. This could limit the supply alternatives for major importers next year. The supply situation in the Black Sea remains delicate with some Russian trade houses suggesting that exports could slow as soon as the end of October with other traders suggesting November. No official statement has been made from government officials but the wheat market will remain extremely sensitive to any news that comes out of the Black Sea. Kansas, Nebraska, Colorado, and Oklahoma will all need more rain in September to start their wheat crops off on the right foot. The forecast for the next 10 days calls for little to no rain in Kansas and Nebraska. Kansas and Nebraska short/very short topsoil levels are at 96% with Oklahoma at 98%. While wheat can and will be planted in drier than normal conditions, the increased use of Hard Red Winter Wheat in feed rations and the potential for better exports in late 2012/early 2013, will demand an increased level of production next year.
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