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NEAR-TERM MARKET FUNDAMENTALS: While there has been some seasonal buying based on ideas that a harvest low is already in place from the winter wheat crop, traders see the weak trend for US wheat exports as an issue to limit advances. Traders also indicate that supply issues continue to lean to the bear camp. Concerns over the potential impact of El Nino weather and of weak India monsoons in the long run have been eased by talk from private traders that good rains in Australia in the next few months could even result in a record crop. Good rains in Argentina last week and news from a key scientist in India that “food” grain output in India could reach last year’s level have added to the talk of better than expected production. Russia’s Agriculture Ministry expects this year’s grain harvest to reach 85 million tonnes as compared with 108.1 million last year, and traders see this as a possible reason to expect less fierce competition from the region for the coming season. Egypt has ordered the re-export of 45,000 tonnes of Ukrainian and Australia wheat which was found to be unfit for human consumption. December wheat closed moderately lower on the session yesterday and near the lows of the day. Fund short covering was noted early in the session, and a move to a new low for the dollar helped support, but a reversal to higher on the day for the US dollar and weakness in other commodity markets helped pressure wheat into the close. Improving crop conditions for the spring wheat crop added pressure to the market. Weather conditions remain favorable for harvest for the winter wheat crop and for development of the spring wheat crop with 74% of the crop rated good to excellent from 59% as the 10-year average. The North Dakota crop is now rated 86% good to excellent from 64% as the 10-year average. 1986 was the highest rated crop in the past 23 years at 87% good to excellent.
CASH NEWS AND TENDERS: Japan is tendering for 144,000 tonnes of wheat. Basis levels were steady to 2 cents higher at the Gulf, but it was down sharply at the Pacific Northwest terminals.
WEATHER: US weather remains favorable for spring wheat crops in the Dakotas, and cooler weather with rains are expected to ease stress in Montana.
TODAY’S GUIDANCE: With outside market forces turning more negative and a reversal up in the US dollar, the path of least resistance remains down. Prices do not seem cheap enough to entice better demand. The El Nino scare for Australia and the monsoon scare for India may not amount to production issues at all, and there is even talk of record high production in Australia this season.
