Pre-Opening Wheat Market Report 11/21

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November 22, 2012 2:45 AM EST

December wheat was trading 1 1/2 cents higher around 7:30 am CST while Kansas City is up 1 1/4 and Minneapolis up 2 1/4. The January Paris Matif contract is down 0.50 Euros overnight. Outside markets had a defensive tone early this morning but conditions shifted to a more positive tone late in the overnight session. European leaders failed to reach an agreement on how to manage Greece's debt situation. European shares and the Euro fell on the news which sparked a recovery in the US Dollar. The stronger dollar pressure grains overnight but grain markets turned positive this morning and Crude Oil bounced on news that Israel and Gaza have yet to reach a cease fire.

The worse than expected winter wheat ratings offered very little support to the trade yesterday as wheat underperformed corn throughout the day. The action in Chicago wheat looked like profit taking as traders took profits in long KC vs. short Chicago wheat spreads. The December wheat vs. December corn spread has also seen a nice round of profit taking after falling from a high of just under $1.50 premium to wheat to just under $1.00 premium this morning. Volume was recorded at 82,288 contracts and open interest fell by 3,799 contracts which supports the theory that the higher trade was supported by hefty amounts of short covering and profit taking.

The export tender lineup remains very thin this week after a busy schedule last week, in which the US did none of the Middle Eastern business. Egypt has failed to release a tender this week but the trade is anxiously awaiting the next release as many see US soft red winter wheat basis the Gulf of Mexico being competitive. Bangladesh issued a tender to buy 50,000 tonnes and Syria is tendering for 100,000 tonnes of soft wheat. South Korea bought 48,200 tonnes of milling wheat and half will come from the US and half from Canada. Japan's Ministry of Agriculture bought 134,693 tonnes of food wheat from the US, Canada, and Australia overnight. The US sold 10.5% protein western white wheat and 14% protein dark northern spring wheat. Canada was the seller of 13.5% western red spring and the Australian cargo was standard white wheat. The shipment period is January. The ministry was tendering for 120,000 of feed wheat but made no purchase on the tender.

Russia is expected to export 9.5-10 million tonnes of wheat for this marketing year vs. 21.63 in 2011/12 according to the head of the Russian Grain Union. The USDA is projecting Russian wheat exports to reach 10 million tonnes. Russian imports are expected to reach 500-800,000 tonnes. The head of the grain union also estimated 2012/13 ending stocks at 6 million tonnes vs. USDA estimates of 4.94 and against year ago levels of 10.44 million tonnes. This would be a critically low level and would likely require a successful harvest next year to enable Russia to be active in the export market. Winter crop sowing was cut to 15.9 million hectares vs. 16.82 as previously expected. The Southern Volga region has remained dry during this season which has hampered plating progress.

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