December Chicago wheat is trading 2 cents lower near 7:30 am CST. Kansas City and Minneapolis wheat are trading slightly weaker as well. The November Matif Milling wheat contract is trading 1.25 Euros higher. The wheat market trimmed some of yesterday's gains overnight but was well supported despite the setback in the soybean complex. The US Dollar is trading slightly lower and US Stocks are set to open lower on the day. The Euro traded higher overnight which pressured the US Dollar but European shares followed Asian market lower which is sending a negative tone through the outside markets this morning.
The wheat market held on to most of yesterday's gains overnight after posting it's largest move higher in a single trading session this month. Volume in Chicago wheat was slightly better than the day prior with 84,285 contracts trading and open interest rose by 3,453 contracts with the move higher. The increase in traded volume is a positive considering most trade desks are thin ahead of the 3-day holiday weekend.
The tender from Saudi Arabia yesterday sent shock waves through the market as it was the first signal that showed major importers could be getting nervous over their own internal supply situation this crop year and fearful of the contracting exportable surplus levels from their normal suppliers. A closely followed Russian grain analyst cut their forecast for Russia's 2012/13 wheat production to 38 million tonnes vs. prior estimates of 39 million tonnes and the USDA estimate of 43 million. The agency also cut its grain harvest forecast to 70.5 million tonnes vs. previous estimates of 71-72.5 million tonnes.
The Russian Agriculture of Ministry will meet with government officials tomorrow to discuss their domestic grain supply and export outlook. Traders and analysts continue to debate on how much more wheat Russia can sell into the export market before their ending stocks fall to shockingly low levels but many in the trade believe the meeting will be nothing more than providing the market with an update on their harvest progress and possibly adjust their production estimates. Regardless, various newspapers and media outlets have grabbed on to this headline item and this has likely added to the positive momentum in the short term.
Traders in Australia are reporting that 1 million tonnes of Australian wheat has been sold to Asia for January through March shipment. Buyers around the world are scrambling for coverage on fears that prices will continue to rise as we head into 2013. Australia's weather has been drier than normal with limited relief over the next 10 days. Australia's 2012/13 beginning stocks are estimated at 7.72 million tonnes which is a comfortable level and will keep them active in the export market. However, if production for 2012/13 is drastically cut, which historical data shows can happen in El Nino years, the pace of exports could slow. Asia is a normal customer of Australia but as demand for feed wheat increases due to high priced DDG's and corn, their usage of feed wheat may continue to increase and boost demand for US exports. Thailand is likely to import 1.5 million tonnes of feed wheat this year vs. 300,000 last year.
*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.