December Chicago wheat is trading 2 cents higher near 7:30 am CST. Kansas City wheat is trading marginally higher while Minneapolis wheat is slightly lower. There were 151 September Chicago wheat deliveries overnight bringing the month-to-date total to 781 contracts. The November Matif Milling wheat contract is trading 2 Euros higher. December Chicago wheat traded a steady range overnight in light volume but rose from session lows after European markets opened. European markets extended gains from yesterday after the ECB announcement of their new bond-buying program. US stocks are set to open higher this morning but today's employment report could shift market sentiment if it disappoints. The US Dollar is lower against the Euro overnight which is adding to the supportive tone this morning.
December Chicago wheat traded sharply higher yesterday following another sale of Black Sea wheat to Egypt. The market reacted bullishly after tonnage was reported at 475,000 tonnes and on thoughts that the bid spreads between origins is beginning to narrow as Black Sea prices rise. Egypt's main state wheat buyer made statements following the purchase that suggest the rising prices are beginning to make other origins competitive and that suppliers like France may soon be a legitimate alternative. Recent price spreads have pegged US offers at $40-50 per tonnes premium to the Black Sea while French offers have been close to a $20 per tonne discount. Some in the trade believe that if US wheat would have been offered in this tender, it would have been nearly a $20 per tonne discount to the highest Russian offers.
The Egyptian purchase has forced other importers to the market as demand grows on fears that global supply is tightening. Syria issued a new tender to buy 100,000 tonnes of soft milling wheat with a deadline of September 10th and Iraq announced a tender to buy 50,000 tonnes of wheat from any origin. Rumors continue to swirl that Iran is looking to buy a very large amount of wheat but no announced tender will be made due to trade sanctions. A South Korea feed miller bought 55,000 tonnes of US feed wheat overnight for October 26-November 15th shipment while another feed buyer from the same country passed on 70,000 tonnes of US feed wheat and instead chose to buy South American corn after prices rose in the US. Export sales will be released this morning and the trade is expecting sales near 450,000-500,000 tonnes.
Unfavorable weather continues to support wheat prices in the US, Australia, and even Argentina now. While the recent rainfall in Argentina was beneficial for soil moisture conditions, it has now raised fears of flooding out wheat fields. This could be problematic for Argentina since production is only expected to reach 11.50 million tonnes according to the August USDA report, which would be a 4 year low. Australia remains drier than normal in the major producing areas of the southeast and no significant relief is expected to be seen over the next couple of weeks. Some traders feel production in Australia could be reduced by 1-3 million tonnes next week by the USDA. Current production is pegged at 26 million tonnes. Hard Red Winter wheat areas in the western plains saw a brief period of moisture this week, specifically for western Oklahoma. Areas of Kansas and Nebraska are expected to see rainfall over the weekend with storm systems currently in eastern Colorado and Northwest Nebraska. Amounts are expected range from.25-2 inches for some areas but the weather for the next two weeks will remain warm and dry.
*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.