US Wheat Follows Other Commodities Down

With no fresh news on underlying wheat fundamentals, the grain followed other commodities down based on the unsurety of the economic bailout of the financial sector in the U.S.

December wheat at the Chicago Board of Trade fell by 20 1/4 cents to $7.16 a bushel as investors held back with the weekend coming up and the economic uncertainty.

The Kansas City Board of Trade followed suit as it came under pressure as well. December wheat fell by 19 1/2 cents to $7.16 a bushel.

There were also concerns about demand needing to increase after Egypt and Iran decided to acquire wheat from Russia this week.

As usual, the Minneapolis Grain Exchange followed in the footsteps of its CBOT cousin, also experiencing a decline to $7.89 3/4 a bushel, a 16-cent fall.

Traders are looking for direction from the quarterly grain stocks and small grain reports by the U.S. Department of Agriculture at 8:30 a.m. EDT Tuesday. Although an estimate, it'll help give a better picture on the actual usage of the grain.

It is thought at this time that the report will say wheat production for August fell from the expected 2.462 billion bushels originally estimated to 2.459 billion bushels.

Wheat Joins Commodity Rally as Investors Flee Equities

With the U.S. dollar falling and investors fleeing equities, the commodity market surged today as many of the dollar-denominated commodities enjoyed a significant uptick. Wheat was part of the swing.

Wheat futures in the U.S. increased by 5 percent Wednesday, moving up from its lowest level in over a year.

December wheat futures on the CBOT ended at $7.25-3/4 a bushel, up 35-3/4 cents, a 5.18 percent move upwards.

Even the news that Egypt decided to buy 205,000 tons of wheat from Ukraine and Russia wasn't enough to pressure the grain, as numerous economic factors lined up to give it a solid push forward.

High global wheat inventories have been putting downward pressure on wheat prices recently.

Australia Should Still have Bumper Wheat Crop in Spite of Drought

Even though some areas in Australia may experience a drop in wheat production because of an ongoing drought, overall the country is expected to enjoy a huge increase in exports in contrast to previous years.

The USDA projects about a 25 million ton harvest in 2008-09, in comparison to 13 million tons in 2007. That amount (25 million tons) is expected to be revised down in the next USDA report. Even so, Russell Phillips, general manager, Australian department of agriculture, fisheries and forestry, said he thinks the country could end up exporting about 16 million tons this year.

The new Australian export regulator, Wheat Exports Australia (WEA), has accredited five companies for exports so far, as Cargill Australia Ltd, Elders Toepfer Grain Pty Ltd, Goodman Fielder Consumer Foods Pty Ltd, Grain Pool Pty Ltd and OzEpulse Pty Ltd made the first cut.

Former export regulator Australian Wheat Board (AWB) was replaced after a scandal caused them to be replaced. Still, they have applied to the WEA for accreditation this week and are waiting for a reply. The AWB was cited for taking illicit payments from the former Iraqi government of Saddam Hussein.

Globally, wheat is expected to reach record levels of 670.8 million tons by May 31, 2009, up by 9.9 percent over last year. Stockpiles could surge by 18 percent to 136.2 million tons, according to the USDA.

Wheat Climbs to Eight-week High On Weak Dollar, Surge in Crude Oil

Wheat enjoyed a comeback on Thursday, as it reached an eight-week high, as crude oil helped lift it up, along with a weakening U.S. dollar. Corn and soybean increases also helped push the commodity upwards.

On the CBOT, December wheat ended the session up 22 3/4 cents at $9.22 1/4 a bushel. December wheat at the Kansas City Board of Trade finished at 23 1/2 cents higher at $9.50 3/4, while December wheat at the Minneapolis Grain Exchange ended the session at $9.82 1/4, a 27 1/4 cent increase.

U.S. wheat export demand should remain strong, as weekly export sales for 2008-09 for the U.S. is at a marketing year high of 916,500 tons. The average of 522 million bushels of export wheat sales is about 10 percent above the five-year average. Wheat shipments are running at about 37 percent higher than the five-year average.

Wheat Outlook and News

US Wheat Review: Slumps In Setback; Consolidation Seen

Wheat Rises as Dry Spell May Curb Australia Crop for Third Year

India May Harvest Record Wheat Crop on Rainfall

Kansas Wheat Report: 2008 Quality Above Average

WA gets new wheat export market

Wheat outlook good in North Dakota

Wheat was once a diplomatic tool

Manitoba crop report: showers delay harvest

Exports of cereals (Romania) climb to 132 million euros

Wheat Growers Facing Tough Cost-Control Challenges in 2009

The end of the huge profits for wheat producers may come to an end next year as skyrocketing prices of inputs, in the face of flattening prices, will challenge producers to manage their costs more efficiently than ever.

Prices of almost everything have increased significantly, including fuel, fertilizer, machinery, labor, crop insurance and seed. A number of these inputs have surged by almost 20 percent over the last year. If producers want to add land to the mix, prices have also increased by 19 percent over the last 12 months as well.

As of 2004, breakeven for wheat was around $4 a bushel, in 2009 it's projected to reach over $6.85 a bushel.

Who would have thought that the idea of $7.00 wheat would have profitability challenges, but in 2009 that's a distinct possibility and probability.

How and when producers buy and at what discount may be the difference between profits and losses next year.

Go here for costs and revenue of irrigated and dryland winter wheat over the last ten years, included the projections for 2009.