September Chicago wheat is trading 19 cents higher near 7:00 am CST. The front month contract has now made 4 straight higher lows since July 24th, and overnight gains surged above 900 once again. The stronger trade was attributed to a bounce in the corn market and higher energy markets. Kansas City and Minneapolis wheat followed the Chicago market higher. Outside markets are mixed with the US Dollar trading slightly higher and stocks index futures are trading marginally lower. The Euro slipped overnight as traders take profits after last week's gains. This added support the US Dollar overnight as trader await a much anticipated European Central Bank meeting this Thursday. Investors continue to look for evidence of World Central Bank plans to ease monetary policy going forward. The wheat market surged higher overnight after disappointing weekend rains in the US and an abysmal forecast this week adds to the stress of US row crops in the Midwest. Underlying support was found on weekend news out of Russia that they may cut grain exports by half in the 2012/13 marketing year. The uncertainly in the Black Sea continues to add risk premium to US wheat futures prices. The November Matif Wheat contract gained 6.25 Euros and gained on the January and March contracts signally nearby market tightness. Weekend showers moved through nearly a 1/3rd of the US Midwest, dropping.50-1.50 inches of rainfall. The brief pullback in temperatures and restricted rainfall is expected to provide relief to soybeans but a return to 90-100 degree temperatures for half the Midwest this week will continue to stress the drier areas. Temperatures will remain warmer and drier the next 11-15 days, with the hottest temperatures felt in Nebraska, Kansas, Missouri, southern Illinois, and southwestern Indiana. On an international scale, the Black Sea continues to be plagued by it's own drought as spring wheat areas will continue to be stressed this week as wheat crops remain in the grain filling stage. Rains were scatted over the weekend but a 1/3rd of the area is susceptible to stress. The next two weeks look warm and dry for Australia as wheat begins to develop more rapidly. Continued warm and dry conditions in August will stress crops during this important stage in wheat development. Australian farms switched to more profitable cash crops this year and many traders feel production at this point will range from 24-26 million tonnes. The USDA is currently projecting Australian wheat production at 26 million tonnes. Australia has been a large seller of feed wheat this year to Asian customers, which has drawn down carryout levels from a year ago. Current USDA forecasts peg the Australian 2012/13 carryout at 7.56 million tonnes. This is down from 8.70 million tonnes in 2011/12 and 8.82 million tonnes in 2010/11. The crop remains at great risk due to the drier than normal start to the growing season. A shift in feed grain demand in the last year continues to favor wheat feeding so a drastic cut to Australian production could provide the US with a competitive advantage to supply these customers from PNW ports. The outlook for the Australian crop is likely hinged on the development of El Nino in August and September. The Commitments of Traders Futures and Options report as of July 24th for wheat showed Non-commercial traders were net long 61,367 contracts, which was a new record level. Non-commercial and Non-reportable combined traders held a net long position of 44,403 contracts. This represents an increase of 5,701 contracts in the net long position held by these traders. The record net long position held by these traders is 50,363 contracts. Trend-following funds (Non-commercial net of Index Funds) increased their net long positions by 6,361 contracts, bringing the total position to 17,086 contracts.
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