[2007-08-09]  Pre-Opening Wheat Market Report
September wheat traded 2 1/4 cents higher overnight.



Strength in the other grains and new highs for European wheat helped support the bounce overnight. From a technical perspective, the new contract high and lower close yesterday is a sign of a potential top for wheat. The trade may watch to see if the highs from yesterday hold and if the market can close lower for the week to confirm a more negative chart pattern. September wheat closed at 650 last week and new highs over 670 3/4 will negate the reversal. The USDA attache in Canada pegged the 2007/2008 crop at 22.1 million tonnes from 25.3 million last year. Egypt is tendering to buy 100,000 tonnes of wheat for October delivery, and it is not clear if the tender is for US or optional origin. European Union wheat prices have jumped to fresh 14-year highs, and French new crop futures posted all-time highs overnight (trading since 1998). The strong export pace has traders looking for an adjustment higher in exports to offset a possible jump in production for the USDA supply/demand report. For Friday's report, traders are looking for ending stocks near 415 million bushels (range 365-544) as compared with 418 million last month. Iraq has finalized deals to import 450,000 tonnes of wheat flour from several suppliers in the region. This is a large order to fill and could help support prices in the region.



The new contract high and lower close yesterday could attract some technical long liquidation selling pressure. The opening was also the highest price for the nearby contract since May of 1996. French wheat futures pushed to new highs Tuesday morning, which added to the positive tone early. News that Egypt bought 145,000 tonnes of wheat from Russia and none from the US in their tender Monday night may have helped spark long liquidation selling after the higher opening yesterday. Japan seeks 131,000 tonnes of wheat at their weekly tender and Morocco is still in the market for nearly 1 million tonnes. The weekly crop update showed that 94% of the winter wheat crop is now harvested vs. a 5-year average near 91%. Spring wheat is now 29% harvested as compared with 21% as the 5-year average.



Dryness in Argentina early in their crop season is a growing concern for the trade as plantings have been delayed in some areas. Wheat basis at the Gulf was steady. For the USDA Crop Production report on Friday, the average trade estimate for all wheat production came in at 2.13 billion bushels (2.086-2.165) as compared with the July USDA estimate of 2.138 billion bushels and last year's production at 1.812 billion. Winter wheat production is expected at 1.55 billion bushels (1.53-1.572) as compared with the July USDA estimate of 1.562 billion bushels and last year's production at 1.298 billion. Traders look for spring wheat production to increase 9 million bushels from the July forecast to 507 million bushels (range 472-535).




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