August 13, 2010

US wheat rebounds 2% ahead of USDA report

US wheat futures regained Wednesday (Aug 11), breaking a three-session low, as traders went ahead of the USDA report expected to estimate lower global output after Black Sea crop damage.

Analysts said additional support for the Chicago wheat market stemmed from US wheat sales to Egypt and China, a sign that buyers are turning to the US for supplies.

The drought in eastern Europe-which has boosted US wheat futures since the end of June-shows no sign of respite, with a senior Russian weather official predicting on Tuesday that the heat in most parts of European Russia is likely to continue over the next 10 days.

"The global grain markets remain very nervous and any further hot and dry conditions in Russia continue to unsettle the market. Export numbers coming out of the US have been a good surprise," said Garry Booth, a trader with MF Global Australia.

Private exporters reported the sale of 120,000 tonnes of US wheat, mainly to China and Egypt, the USDA said Tuesday (Aug 10).

CBOT wheat futures are up 66% from the June low of US$4.25-a bushel despite losses since the market fell from a two-year peak on Friday (Aug 13). On Wednesday, CBOT wheat for September delivery rose 1.9% to US$7.07-per bushel by 0259 GMT after sliding 2.5% in the previous session.

China's National Bureau of Statistics warned that lower global wheat output could translate into inflationary pressure for the world's top producer and consumer of the grain.

Analysts were expecting the USDA's forecasts for US wheat, corn and soy production to rise when it releases its monthly estimate at 1230 GMT on Thursday (Aug 12). But US ending stocks were seen falling as global crop woes will force end users to look to the US to satisfy their supply needs.

World wheat production was expected to come in at 650.02 million tonnes, down from the USDA's July forecast of 661.07 million tonnes, according to a Reuters survey.

CBOT September corn gained 0.4% to US$3.95-a bushel and August soy were up 0.7% to US$10.43-a bushel. Soy and corn futures, which have been tracking gains in the wheat market, remain under pressure from expectations of large crops in the US.