Pre-Opening Wheat Market Report

March wheat was up slightly late in the overnight session. Outside market forces look bullish today with a weak US dollar and a jump in energy and equity markets. Gold prices also jumped. There were 42 deliveries against the December contract to push the three-day total to 564. While it appears that more and more wheat is moving into feed channels, the abundant world supply plus the increase in fresh supply from the southern hemisphere remains as an obstacle for the bulls. Argentina harvest is near 29% complete, which is up 8% from last year's pace. However, a tightening supply of higher quality milling wheat due to too much rain on the Australia harvest plus a bullish tilt to outside market forces could help support a continued short-covering trend over the near-term. March wheat closed slightly higher on the session yesterday, while March KC wheat closed up 8 cents on the session after trading moderately lower on the day into the mid-session. A firming tone for the US dollar from moderately lower trade early helped to pressure the market after a higher opening. However, reduced volatility in financial markets sparked a strong recovery off of the mid-session lows yesterday. Weakness in metal and energy markets after choppy to higher trade in both markets early was seen as negative. This has revered overnight. Weekly export sales for wheat, released before the open yesterday, came in at 503,000 metric tonnes, which was in line with trade expectations. Cumulative wheat sales stand at 67.5% of the USDA forecast for 2011/12 (current) marketing year versus a 5 year average of 68.8%. Sales of 318,000 metric tonnes are needed each week to reach the USDA forecast. The EU granted export licenses for 352,000 tonnes, which pushed cumulative sales for the year to 6.5 million tonnes, compared with 10.1 million by this time last year. Taiwan is tendering to buy 82,750 tonnes of US wheat. Japan is tendering to buy 104,963 tonnes of wheat at their weekly tender. Saudi Arabia is still tendering for 330,000 tonnes with offers due today, and there could be a sale over the weekend.