Since the June 30 acreage report, where the USDA estimated all wheat acres at 54.3 million, the smallest United States acreage total since 1971, the wheat market has had an impressive rally.

Comparing the high scored on Aug. 6 to the close on June 29, wheat has traded in a range of $3.84. In fact, the month of July saw the largest single monthly gain since 1973.

Part of the reason wheat has rallied is world and U.S. fundamentals. True there is no shortage of wheat in the U.S. As of the July supply/demand report, United States wheat ending stocks were estimated at 1.093 billion bushels, the largest supply of U.S. wheat since 1982/83.

To say we have plenty of supplies available in the United States would be an understatement. At the end of June, large trading funds were comfortably holding a net short position of 48,883 contracts. Since that time, talk about drought effecting the European Union countries of Russia, Kazhatzan and other Black Sea region wheat areas has garnered market attention.

At one time, Russia’s wheat production forecast was close to 75 million metric tons, however this is expected to fall sharply this year. The forecast of 75 mmt is too optimistic, IGC Chief Executive Yury Ognev told Reuters’ Insider television. Production may be around 65 mmt.

Ognev called for a Russian ban on exports for at least four to six weeks after which prices may stabilize and exports may restart. He said if the ban is not imposed, Russian wheat exporters may default on shipments.

Not to raise export duties, but to declare a 100 percent ban and not put companies like international and Russian exporters, in a bad position, because otherwise we will be in trouble executing our contracts.

Since Ognev made those statements, Russian President Vladimir Putin imposed a ban on Russian grain exports effective Aug. 15. This ban applies to previous sales already made, allowing exporters to declare a force majeure and prevents any new sales from being made. It is anticipated, this ban will effect as much as 600,000 mts of Russian wheat sales that are already sold to Egypt, but not yet shipped.

In the U.S., traders are hoping the United States will be able fill the missing void of EU wheat exports with wheat from the United States and thus trim U.S. ending stocks. Funds have covered the once large net short position and are, as of the USDA’s Aug. 6 report, now 20,542 contracts net long.

This represents a buying spree of 69,425 contracts in only five weeks. How high will wheat prices go is a popular question. Weekly charts have major resistance around $7.50. If wheat can close above this level, the 2008 highs of $9.47 are the next objective.

For producers, marketing this year’s wheat crop and next year’s as well makes good marketing sense.

Corn analyis

Corn closed the week $.12 1/4 higher. Last week, FC Stone released its 2010 U.S. corn production estimates showing the 2010 corn crop at 13.43 billion bushels. The corn estimate was slightly larger than the USDA estimate of 13.245 bb. Stone issued a yield estimate of 165.8 bushels per acre. Currently, the USDA is using a yield estimate of 163.5 bpa. Also last week, the USDA reported a 232,000-mt sale to an unknown destination and 157,581 mts to Japan.

Last week’s crop progress report showed national good-to-excellent ratings were 71 percent, 1 percent lower, compared to a week ago. Iowa is rated 70 percent g/e, Nebraska 84 percent, Minnesota 90 percent, Illinois 63 percent and Indiana at 63 percent. 10 percent of the crop is rated either poor or very poor. Last year’s ratings were 68 percent g/e and 10 percent p/vp.

Strategy and outlook: Hedgers have sold or hedged a portion of the 2010 crop when December futures traded above $4.50 and between $3.80 and $4. Producers should have also bought new crop put option protection and should use additional market strength to roll put options to a higher price level.

Making 2011 sales above $4.50 is a great place for next year’s marketing plan.

Soybean analysis

Soybeans closed the week $.12 1/2 lower from last week. Last week, FC Stone released its production estimates showing the soybean crop at 3.428 bb. The estimate was larger than the current USDA figure of 3.345 bb. Stone’s yield estimate was 44 bpa compared to the USDA estimate of 42.9 bpa.

The USDA reported crop ratings of 66 percent g/e, 1 percent lower compared to last week. Iowa is rated 71 percent g/e, Illinois at 64 percent g/e, Indiana 64 percent g/e, Minnesota 87 percent g/e and Nebraska at 77 percent g/e. 11 percent of the crop is rated p/vp. Last year, 67 percent of the crop was rated g/e and 8 percent was rated p/vp.

Strategy and outlook: Producers have sold/hedged the 2010 crop when November futures traded above $10.30, $9.87 and $9.60. Producers should have purchased new crop put option protection and can use additional price strength to roll up those put options to better protection levels.

Making 2011 sales above $10.30 is a great place for next year’s marketing plan.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.