December Chicago wheat is trading 6 cents higher near 7:30 am CST. Kansas City and Minneapolis wheat are higher as well. There were no September Chicago wheat deliveries overnight bringing the month-to-date total to 781 contracts. The November Matif Milling wheat contract is trading.75 Euros higher. The wheat market led the grains higher overnight but has eased off its highs in the early morning trade. The US Dollar is trading slightly higher following Friday's sharply lower trade and crude oil is steady. European markets inched lower to the start the week on profit taking following last week's gains and ahead of a German ruling on the Euro zone's new bailout fund announced by the ECB last week. Investors are looking ahead to Wednesday's FOMC meeting where most feel the Fed will announce new stimulus plans following last Friday's weak jobs data.
Chicago wheat led grain markets higher last week and the trend continued overnight. The December contract is approaching the high end of its recent trading range as fears continue to mount over Russia's export capabilities going forward, and on adverse weather conditions in Australia. This week's USDA report is expected to focus on world production with most in the trade expecting cuts in Black Sea, as well as Australian production. Money has begun to flow back into the wheat market as positive news headlines begin to shift momentum to the bull camp. The Commitments of Traders reports as of September 4th showed Non-Commercial traders were net long 55,191 contracts, which was an increase of 2,806 contracts and the buying trend is a short-term positive force. Trend-Following Funds (Non-Commercial Net of CIT) held a net long of 11,736 contracts, up 2,713 for the week. The largest long position ever held by these traders was 30,146 on October 24, 2006. These same traders also held a net long position of 36,183 contracts in Kansas City wheat.
Russian wheat prices have risen in the last couple of weeks and some private analysts expect the trend to continue this week. French wheat offers for milling wheat were close to a $20 premium to Black Sea but some contend this spread has nearly vanished as shipment periods move out to November or beyond. The French farm ministry cut its soft wheat crop estimate to 36.5 million tones vs. 36.7 in August, but this is still 7.5% above their 2011 production. Some estimate that Russia Black Sea prices for 12.5% protein wheat were near $319 per tonne last week vs. $314 the week prior. Another meeting with government officials to discuss Russia's domestic grain supply situation is expected in October.
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 2 weeks. September is the most critical period of growth for wheat in Australia as the plants begin their grain filling state. The moisture deficits and high heat, particularly in the eastern growing regions, continue to stress crops. US wheat prices off the PNW were a slight discount to Australian offers into Asian markets last week. Some analysts believe US soft white wheat and high protein spring wheat could trade a discount to Australian prices in the next 1-2 months. Traders feel production in Australia could be cut to 22-23 million tonnes vs. current USDA estimates of 26 million tonnes. Australia's current government forecast pegged wheat production at 24.1 million tonnes but a new estimate will be released tomorrow.
*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.