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ANALYSIS-US wheat to dominate export market until fall

    By Lisa Haarlander 

    CHICAGO, July 18 (Reuters) - The United States will dominate the wheat export market for the near term, capitalizing on drought that slashed yields in Ukraine and Russia and rain hurting the French wheat crop.

    The competition is expected to increase sharply beginning this fall, as Canada markets it new crop and Australia begins its harvest.

    "For the next 60 to 90 days, it will be a U.S. show," said a wheat exporter. "After that there will be considerable pick-up in competition."

    For now, the United States, the world's top wheat exporter, is the only nation with large amounts of wheat for sale abroad, traders said. U.S. wheat weekly export sales have already hit levels not seen since 2003, traders said.

    "For the short term, until those other supplies become more plentiful, we should continue to see good export business being reflected in the wheat," said Shawn McCambridge, wheat analyst at Prudential Financial in Chicago.

    U.S. wheat had its largest one-day sale in several years on Tuesday when Egypt's General Authority for Supply Commodities bought 240,000 tonnes of U.S. soft red winter wheat for shipment Aug. 16-31, traders said.

    "No one else offered GASC any wheat. It was all U.S. with only a little bit of Russian," said a wheat exporter. "I don't think I've seen supplies this tight and demand this high since 1996."

    U.S. wheat export sales reported by the U.S. Agriculture Department on Thursday could be between 500,000 and 800,000 tonnes -- far more than average for this time of year, traders said.

    Last week's export sales were more than 1 million tonnes -- the first time since 2003 that much U.S. wheat was sold in one week, traders said.

    Traders anticipate that next week's sales will top 1 million tonnes again due to the large sale to Egypt.

    Sales are soaring despite futures prices at the Chicago Board of Trade hovering near 11-year highs.

    "Business is very good right now," said a U.S. wheat trader. "I'm making sales every day."

    EYE ON AUSTRALIAN WEATHER 

   Competition in the wheat export market should increase in the next two to three months as the harvest starts in Australia. In addition, Canada and France will have finished their harvests. Recent rains are hurting the harvest in France, which is about 50 percent complete.

    "Europe is happy that the United States can provide wheat in this first part of the campaign because we won't be ready soon and we don't have that much to export this season anyway," said a trader in Europe, stressing that the EU's export potential this season was lower than in 2006/2007.

    "The United States are taking market shares because we just  don't have the potential," the European trader said.

    Wheat traders were keeping a close eye on the weather in Australia. Any production problems in the Southern Hemisphere would likely send wheat prices even higher. Australia was expected to have a large crop after rains relieved the nation's worst drought in 100 years.

    "The end users are concerned that the supplies and quality might not be there if they hold back," said McCambridge of Prudential Financial. "And if conditions worsen, then the price will go against them."