September wheat was up 18 cents late in the overnight session. Outside market factors look supportive today with the sharp drop in the US dollar and strength in energy and metal markets overnight. The market has seen a solid recovery off of this week's lows, as outside market forces turn more positive toward commodity markets in general. Traders also see better feeding demand for wheat, as hard red is moving into feedlots due to a lack of available alternatives. There is also talk of increased feed usage in east for soft red wheat. Trade focus is on the spring wheat crop for the USDA reports in the morning. On top of reports of lower than expected yield for the early harvest, traders will also monitor a special survey of four spring wheat producing states for any changes in the planted area due to spring flooding. For the USDA production and supply/demand update on Thursday morning, traders see US wheat production down about 20 million bushels from 2.106 billion bushels last month. However, world production is expected to be revised higher, which might cause some adjustment lower in US exports as well. Traders see world ending stocks for the 2011/12 season to be adjusted higher by about 500,000-600,000 tonnes from the 182.19 million tonnes forecast last month. Better crops from Russia and Europe are expected. As a result, export usage numbers could be adjusted lower. Even with a lower crop and higher feed usage, traders see ending stocks for the 2011/12 season near last month's estimate of 670 million bushels. September wheat closed 15 1/4 cents higher on the session yesterday but down 15 1/2 cents from the day's highs. The surge higher in the US stock market and a weaker US dollar helped support a solid recovery in wheat prices, and an aggressive short-covering trend was noted. The rally in European wheat and talk that fund traders were actively exiting shorts ahead of the USDA reports lent support. Traders noted a downgrade in spring wheat crop conditions and the fact that the recent COT report showed a hefty net short position from fund traders as other factors which lent support. Egypt bought 60,000 tonnes of soft wheat from Russia yesterday. Saudi Arabia is tendering to buy 660,000 tonnes of hard wheat. French officials raised their production forecast for wheat to 33.3 million tonnes from 32 million last month, as yields were better than feared.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.