December Chicago wheat was trading 7 cents lower near 7:30 am CST with KC and Minneapolis following. The November Matif Milling wheat contract is trading 1.75 euro lower overnight. European markets edged lower with the Euro trading modestly higher overnight. Most commodities were steady ahead of this weekend but the grain complex saw a weaker trade in the overnight session after strong gains yesterday. Marginal losses in corn were linked to profit taking ahead of the weekend and wheat lost to corn on follow through from yesterday. In the early action today US share prices were marginally higher, but not strong enough to signal a risk-on environment in the early going.
December Chicago wheat traded sharply higher yesterday on what was considered a neutral USDA report but the rally in other grains supported the bounce in wheat. Traded volume in Chicago wheat was recorded at 112,976 contracts and open interest jumped by 14,030 contracts. Cuts in world and US ending stocks came in as expected and a slight increase to the Soft Wheat carry out at the expense of the Hard Winter wheat carryout suggested KC wheat may need to gain on Chicago wheat in the short term.
World ending stocks for the 2012/13 season came in at 173 million tonnes as compared with 176.7 last month. The USDA cut Australian production to 23 million tonnes vs. 26 previously. Despite the cuts in the world carryout and production for various countries, there have also been many government forecasts this week that suggest countries continue to be ready and able to export more wheat which could put pressure on US prices. The Ukraine government increased exports to 5 million tonnes vs. 4 million tonnes previously and the France farm office increased exports for non-EU members for 2012/13 to 9.5 million tonnes vs. 9 million tonnes previously. The Russian wheat export forecast for 2012/13 increased to 9 million tonnes from the 8 estimated in September, according to the USDA yesterday. The India wheat export forecast for 2012/13 increased to 5.5 million tonnes vs. 4.5 according to USDA in September. Offsetting some of these export increases was a cut in wheat production by the government of Argentina to 10.12 million tonnes vs. USDA estimate of 11.5. In addition, the USDA expects Australian exports to reach 18 million tonnes vs. 21 million tonnes previously.
The US is the top wheat exporter in the world with projected exports of 31.3 million tonnes or 1.15 billion bushels which is down from 1.2 in September. US wheat remains overpriced in the world but the market should get a fresh look at bid spreads between origins once Jordan buys wheat after it released a tender yesterday for 100,000 tonnes of milling wheat and the closing date on the tender is October 23rd. Flour millers in Indonesia bought 25,000 tonnes of US wheat for November shipment and a South Korea feed maker passed on 70,000 tonnes of feed wheat due to the recent rise in prices. India continues to float export tenders to the market as they remain aggressive sellers due to bulging domestic stocks.
The Russian Agriculture ministry slightly raised its 2012 grain crop forecast to 71.7 million tonnes vs. their previous estimate of 71 million tonnes. This production estimate remains well below 2011 levels of 94 million tonnes however the government remains confident that no export restrictions will need to be put in place this year despite rising inflation for the country.
Weather looks favorable for areas of the western plains from today through the weekend. Storm systems are moving through areas of North central Oklahoma and South central Kansas this morning which should benefit wheat emergence. The driest areas of the Hard Red Winter wheat belt remains northwest Kansas, southern Nebraska, and South Dakota.
*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.
Copyright CME Group All rights reserved.