December Chicago wheat was trading 11 cents higher near 7:30 am CST. Kansas City and Minneapolis wheat are trading higher as well but losing ground to Chicago. The November Matif Milling wheat contract rose by 1% or 2.75 Euros overnight after newswires reported that the Ukraine Ag Ministry would ban wheat exports as of November 15th. The reports sent Chicago wheat sharply higher near 3:30 am cst and gains are holding this morning. The US Dollar traded modestly higher against the Euro as EU leaders meet in Brussels to discuss their debt situation. Stocks are set to open slightly lower on the day while Gold and Copper move lower.
Unconfirmed reports suggesting an export ban in Ukraine, prospects of greater feed wheat use by world importers and dry conditions in the western US add support to wheat markets. The bullish momentum yesterday spilled over to today and bulls received an extra, headline driven boost courtesy of Ukraine. Yesterday's volume was recorded at 69,400 contracts which is still rather subdued relative to average levels. Open interest increased by 2,493 contracts on the sharp move higher.
The Black Sea is back in the headlines. The reports are unconfirmed at this point but sent shockwaves through European wheat markets which spilled over the US overnight. The move may come as no surprise to many after the government and trade unions have already agreed on export restrictions already. Months ago the two agreed that the maximum level of exports would be 4 million tonnes and surprisingly this level was renegotiated to 5 million tonnes in September. Regardless, the report has sent bears running for cover.
Jordan, Iraq, and Syria are expected to show results of their wheat tenders next week but there is a chance for cancellations as wheat prices in Europe and the US have risen sharply in the last 48 hours. India issued an export tender for 100,000 tonnes of wheat through December and continues to be an aggressive seller of wheat as domestic stocks surge and world prices rise. Japan's use of corn fell to a 20 year low in August while wheat use grew to 4.3% which was the highest in nearly 2 decades. July 2012 wheat used was pegged at 4.1% while August 2011 usage dropped to 1.3%. Rising corn prices have shifted demand to wheat and the trend may continue long term.
Mostly dry conditions remain for the western third of Kansas, southern Nebraska, and nearly all of South Dakota. Short to very short topsoil moisture conditions as of October 14th showed South Dakota at 96%, Nebraska at 95%, Kansas at 62%, and Oklahoma at 55%. The dry conditions are creating wheat emergence problems and more rain is needed to begin germination. Reports of high winds in western Kansas are also adding to the negative start. This could be positive for KC and Minneapolis wheat prices if rainfall continues to miss these areas.
*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.
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