December Chicago wheat was trading 4 1/2 cents lower near 7:30 am CST. Kansas City and Minneapolis wheat traded weaker as well but Minneapolis was the leader of the complex. The November Matif Milling wheat contract is trading 0.25 Euros lower. Wheat began Sunday night in positive territory but the weaker trade in soybeans mixed with negative outside markets quickly limited any substantial gains. The remainder of the night had a risk off tone and weak European markets added to the negative tilt. Germany released a poor IFO business survey for September which sent the Euro lower against the US Dollar. Gold, Copper, and Crude Oil are all trading sharply lower which is adding the weakness in the grain market.
The wheat bulls continue to be fed rumor after rumor out of Russia and the continued talk of a slowdown in wheat exports is keeping good underlying support in the market. Prime Minister Medvedev made statements regarding this year's grain production overnight after mixed signals on Friday from the country's Economy Minster and the Deputy Prime Minster. The Prime Minister pegged the country's total grain production at 70 million tonnes which is in line with trade estimates. Comments were also made that suggested the country has enough production and carry-in stocks to cover this year's domestic demand and export commitments. However, it's unlikely these comments will calm the market down at this point. A closely followed analyst in Russia raised his grain export forecast for Russia to 12.2 million tonnes with 9.5 million tonnes expected to be wheat. The USDA estimates wheat exports for Russia at 8 million tonnes and many feel the country has nearly reached that threshold already.
Last Friday's volume was reported at a sluggish 71,590 contracts and open interest actually declined by 21 contracts. Volume has been abysmal in wheat and no drastic increases have been made on surge in prices. The data suggests a neutral to bearish view of the market. The Commitments of Traders reports as of September 18th showed Non-Commercial traders were net long 53,675 contracts, an increase of 835 contracts for the week. Trend-Following Funds (Non-Commercial net of index funds) hold a net long of just 964 contracts which was down 7,700 from the week prior. These same funds increased their holdings in KC wheat by 3,195 contracts to 40,342 contracts.
Iraq issued a tender to buy 50,000 tonnes of wheat overnight. Russia was the seller of the last Iraq tender. South Korea rejected all feed wheat offers for its tender released Friday and instead booked corn. The export lineup remains light at this point and another significant break in prices will be needed to see Egypt come back into the market although recent statements suggest they have a 7 month supply on hand. Morocco is expected to tender soon after it took its import duty on wheat to zero. December Chicago wheat is trading nearly a $1.50 premium to December corn which has made US wheat mostly uncompetitive to corn in domestic and international feed markets.
Showers were seen in Western Australia over the weekend and some suggest totals were near a half inch. Another rain event is expected middle of this week which should relieve stress for nearly a quarter of the southern wheat belt. Showers are also expected to occur in southeastern Australia towards the end of this week. The wheat crop is beginning to head so the rainfall is occurring at a key point in the plants growth cycle. Continued showers over the next 2 weeks could limit additional yield loss but sharp declines in total production are still expected.
*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.