December Chicago wheat is trading 2 cents higher near 7:30 am CST. Kansas City and Minneapolis wheat are slightly higher as well. The November Matif Milling wheat contract is trading.75 Euros lower. The wheat market saw a steady trade overnight but broke lower following the open of European markets. The Euro edged lower along with European stocks following data that showed Spain's economy shrunk by 0.4% in the 2nd quarter vs. 0.3% in the 1st. Investors are fleeing risk assets ahead of this week's Jackson Hole meetings where the market will keep a close eye on the US Federal Reserve Chairman in hopes that he will signal further monetary easing is on the way. The US Dollar traded lower overnight and crude oil is slightly higher.

The wheat market struggled to hold a firm footing yesterday and finds itself in the same spot this morning. Beneficial rainfall last week in the west and the potential for heavy rain in the southeast and delta should promote better soil moisture conditions for fall wheat planting. The Egyptian purchase of Russian and Romanian wheat has been a drag on US wheat futures but the markets focus will shift back to the potential for Black Sea exports to slow by December and poor Australian weather.

Russia's Deputy Prime Minister will meet with the Agriculture Minister on Friday to discuss domestic and export grain prospects following this year's drought. The recent sales by Russia to Middle Eastern countries have traders questioning how long the region can sustain their pace of sales given surging domestic food inflation and shrinking supplies. No drastic action is expected to take place Friday but traders will watch for language pertaining to cuts in total grain production or export forecasts over the next 6 months. A private analyst out of Ukraine cut their forecast for Ukraine's 2012/13 grain exports to 21.15 million tonnes vs. previous estimates of 23.33. The analyst also cut their 2012/13 wheat export forecast to 6.3 million tonnes vs. prior estimates of 7 and the current USDA forecast is 6 million tonnes.

Rainfall in Australia continues to disappoint which is offering underlying support to the wheat market. The Australian Bureau of Meteorology now sees a 50-70% chance of rainfall exceeding median levels from September to November in major growing areas of the southwest. Furthermore, the department shows a 30% chance of rainfall exceeding median levels, for the same time period, in the southeastern portion of the country. The lack of precipitation and high heat could begin to stress crops in the jointing stage as soon as 2 weeks from now. The USDA pegged Australian wheat production at 26 million tonnes but a cut of 2-3 million tonnes in the September USDA report would not surprise. The weekly Spring Wheat Harvest report showed 89% of the crop is harvested compared to 79% last week and 44% last year. The 10 year average for this time of year is 64%.

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