December Chicago wheat is trading 14 cents higher near 7:30 am CST. Kansas City and Minneapolis wheat are higher as well but lagging the move in Chicago. The November Matif Milling wheat contract is trading 3 Euros higher. There were 20 September Chicago wheat deliveries overnight bringing the month-to-date total to 925 contracts. Most commodity markets were stronger overnight following the Feds decision to allow for more monetary easing for an undisclosed period of time. The US Dollar is trading lower for the 4th day in a row and European and Asian equity markets were higher overnight offering broad based support to the commodity complex. Tensions in the Middle East are also adding a positive tilt to the wheat market as traders anticipate increased demand in the coming months.
December Chicago wheat surged to its highest level this month following the announcement by the Federal Reserve to begin another round of monetary stimulus. In addition, thoughts that recent developments in the Middle East, along with a supply outlook that is contracting for major exporters could mean higher prices lie ahead. The fact that the US Dollar fell to its lowest level since November is also supportive to the market.
France sold wheat in yesterday's Egyptian tender for the second time this week. The purchase only magnified the tightening supply outlook in the Black Sea as offers begin to rise and price spreads narrowed. The shipment period for the 235,000 tonnes of Russian, Ukrainian, and French wheat was for November 21-30 and many traders feel that the next couple tenders will be done completely by France as shipment periods move into December. The French wheat actually traded a slight discount to Russian on a FOB level and was $2-3 per tonne higher than Ukraine. There was one offer for Soft Red Winter wheat out of the Mississippi River but it was nearly a $10 per tonne premium to Russian prices.
Tensions continue to rise in the Middle East and traders should monitor the situation closely as protests in Egypt, Libya, and Yemen may spread to Algeria, Tunisia, and Jordan. Wheat stocks may stand below levels that are preferred in these major importing countries and demand for food grade products could increase as local governments attempt to stabilize rising domestic food prices.
Australia's wheat crop could decline further without a significant rainfall in the next two weeks. A large bank in Australia and New Zealand cut their forecast for this year's wheat production to 20 million tonnes which was 3 million tonnes lower than their prior estimate. The forecast is also 2.5 million tonnes lower than the recent ABARES estimate. Some feel the recent ABARES forecast of 22.50 is overstating the crop due to the consistent dryness in the southern growing regions.
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