U.S. wheat futures are expected to stumble early Thursday as gains overnight in the dollar and lackluster export demand weigh on prices. Traders predict soft red winter wheat for September delivery, the most actively traded contract, will start trading down 10 cents to 12 cents a bushel at the Chicago Board of Trade. In overnight electronic trading, the contract fell 12 1/2 cents, or 1.8%, to $6.98 a bushel. Strength in the U.S. dollar overnight is pushing prices lower as traders worry it will decrease foreign demand. A firm dollar makes U.S. grains look less attractive to foreign buyers. "A surging U.S. dollar is also weighing on the broad commodity markets," noted Benson Quinn Commodities, a brokerage in Minnesota. Traders are already nervous about export demand due to increased competition for business from Russia. Egypt, typically the world's top wheat importer, bought 240,000 tons of Russian and Romanian wheat in a tender Thursday and none from the U.S. Russia has been undercutting prices for U.S. wheat on the world market since it resumed grain exports last month after banning them for nearly a year due to a devastating drought. The U.S. Department of Agriculture's Moscow attache said Thursday that weather this year has been largely favorable and raised its estimate for 2011-12 grain output 1.8% to 87 million tons. That indicates there will be even stiffer competition for export business. "In most provinces, the grain crop looks good so far," the USDA said. Weekly U.S. wheat export sales showed demand is not booming. The USDA said sales for the week ended July 28 were 504,100 tons, within expectations of 300,000 tons to 600,000 tons.

Source