Pre-Opening Wheat Market Report 8/22

  on August 22 2012 10:24 AM

September Chicago wheat is trading 9 cents lower near 7:30 am CST. Wheat markets have taken on a softer tone overnight as corn and soybeans trended lower. The lower trade is also linked to profit taking from gains seen this week.

Outside markets are offering pressure to the grain markets today with the US Dollar trading higher and the US Stock market set to open the day lower. Poor export data reported out of Japan overnight is adding to the negative tone this morning. The wheat market surged higher yesterday and the September Chicago wheat contract has now seen 4 straight sessions of new highs. Initial support came from a sharply higher corn and soybean market but new highs were posted later in the session as fears of a slowdown in Black Sea exports along with dry conditions in Australia continue to demand risk premium in prices. Traders continue to have a "wait and see" attitude towards the developments in the Black Sea. Russian wheat yields are being reported below year ago levels and the market believes total wheat production could be near 40 million tonnes. Formal acceptance to the World Trade Organization was granted to Russia today which is being overshadowed in world grain trade by fears that export restrictions could be put in place later this year or early next year. The Black Sea region has seen better rainfall recently which should help soil moisture conditions for planting which is offering minimal pressure to prices at the moment. The Russian grain harvest is 54% complete as of August 20th.

Australia's weather bureau reported that Western Australia has a 70% chance of receiving good rainfall in the next two months but warned that up to 40% of this regions crop could be lost if dry conditions persist. September and October are the most important growth periods for their wheat crop and Western Australia produces more than a third of Australia's national wheat production. Nearly 2 million tonnes of wheat production could be lost if adequate rainfall does not fall by the end of September. Slightly better rainfall has been seen in the last 24 hours but it is offered only short term relief to the stressful conditions. A close monitoring of weather patterns for Australia is warranted.

It was reported Tuesday that Iran purchased 400,000 tonnes of milling wheat recently. The timing and details of the transaction are difficult to ascertain due to the way in which the country enters and exits the global market. Some traders suggest the purchase could have been as large as 500,000 tonnes and the origins are expected to be the European Union, Baltic Sea, and Black Sea. Iran made large purchases of wheat earlier this month and also announced a barter agreement with Pakistan. Issues with domestic food security and trade sanctions has kept Iran in the market for milling wheat and it is uncertain as to how much more the country will be purchasing.

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