December Chicago wheat was trading 5 cents higher near 7:30 am CST. Kansas City and Minneapolis wheat traded stronger as well with Minneapolis leading the 3 wheat markets. The November Paris Matif contract was up 0.25 Euros. European and Chinese markets were stronger overnight and the Euro hit a one-month high against the US Dollar overnight. The European markets were steady to higher as traders wait the European Summit that begins tomorrow and ends Friday. The US Dollar fell, which sent most commodities higher overnight. Grain markets saw marginal gains but volume remained thin.
The wheat market led grain markets lower yesterday after more technical signals triggered profit taking. The mixed pattern of trade in corn and soybeans provided limited direction for wheat as it deals with an uncompetitive export price in the world market and sluggish export demand. Volume in Chicago wheat has diminished with each day this week and yesterday's volume was recorded at only 56,899 contracts. Open interest fell by 851 contracts.
Algeria bought a total of 400,000 tonnes of optional-origin wheat overnight but many feel the origin is South America. The original tender was for 50,000 tonnes. The US continues to be uncompetitive in the Southern Med Basin market despite nearly a 40 cent decline in futures since October 11th. Egypt has not tendered this week but many feel they will come to market before this weekend. Much like Algeria, it will be difficult for the US to compete in this business and comments made by the Vice Chairman of GASC (Egypt's Official Purchasing Agency) suggests that French and Argentina offers are expected to be the most competitive in the world as prices in the Black Sea rise. Despite this, Argentina's ability to sustain any type of consistent export pace to the Middle East will be limited as production has fallen to 11.5 million tonnes according to the USDA but some private estimates peg the crop at just under 11 million tonnes.
The Russian Grain Union announced that the countries winter wheat sowing was successful and the target for the 2013/14 harvest would be no less than 50-55 million tonnes vs. 40 this year. Many concerns exist including soil moisture deficits, specifically in the major growing regions like the Volga Valley, and the effect this will have on germination. The weather in Australia remains dry this week and continued stress is expected to cut yield prospects further. Some private estimates are now ratcheting down to nearly 20 million tonnes in production vs. USDA's estimate of 24.
China reportedly bought 295,000 tonnes of Canadian spring wheat (High Protein) over the last couple of weeks for November through January shipment. Some traders even suggested the total tonnage could be near 500-600,000 tonnes. China imported 377,000 tonnes of spring wheat from Canada in 2011/12 so the volume is quite significant for a single purchase.
*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.
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