Market of wheat: perspectives

Weather conditions remain the main factor influencing the price on wheat.

The hot weather in the USA during the weekend and the forecast promising no rain in the south of the country made the price get back to the level of 800.

The report released on May 9^th shows that the conditions of the US crops have been reconsidered once again (in the negative direction):

The pace of the sowing campaign is at the lowest level since 1996. At this point only 22% of the work is done.

The current situation in the world:

·         The drought in Europe and the cold weather in Canada also support the prices

·         The ban on the export of wheat from Russia may be cancelled this year

China is planning to expand the import of feed wheat by 2-3M tons in 2011-2012.

Argentina is going to increase the production of wheat by 3M tons (up to 18M tons) in 2011-2012 is going to grow.

Japan: the import of wheat is expected to decline by 5%. According to the Japanese Department of Agriculture the country is planning to import 5M tons.

The current situation: 2 weeks ago the price of wheat exceeded the level of 800 but failed to consolidate above it despite the fact that the fundamentals were bullish. The decline was provoked by the weakness seen in the commodity markets, which in its turn was caused by the negative ADP Employment and Services PMI reports for April.  The negative news made the market more concerned about a possible slowdown in the pace of the US economic recovery, which in its turn pressed the prices on wheat. On May 11^th the US is to publish the monthly reports on the current supply-and-demand balance, production and stocks for the current marketing year. These reports can be used to define the direction of the future price movement:

-          If the forecast is negative the price will make the last effort to rally up to 850-900.

-          If the forecast is positive or neutral the price will be influenced by such economic factors as oil prices, the economic condition of the US and China and some stock indexes.

Against the background of the current weather conditions and forecasts the 1^st scenario is more probable:

The Department of Commodity Trading,