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March 20, 2008


(See attached file: PR 080320.pdf)(See attached file: PR 080320.xlsx)

Highlights
  • U.S. delivered values were in freefall this week with strong declines in futures, basis, freight and the dollar exchange rate. Beneficial weather and higher planted area around the globe supported a decline in new crop cash values while old crop prices eroded as an improved supply outlook outweighed strong import demand. The price decline was amplified by a sell off across commodity and equity markets. For the week, May delivery prices at the CBOT were down $1.18/bu, the KCBOT fell $1.37 and the MGE lost 43 cents/bu. Corn nearbys were off 40 cents/bu and soybeans down $2.02/bu.
  • Market recap: Fears of continued instability in credit markets took wheat futures down the 60 cent limit on Monday, increasing limits for subsequent sessions. Prices rallied Tuesday along with equities and energy as strong import demand supported, then tumbled hard the rest of the week with other commodities. Wednesday brought record one-day declines for gold and crude oil while wheat fell the expanded 90 cent limit. A large sale to Egypt today did not keep futures from falling further.
  • Old crop demand remains strong with several large purchases booked this week for the Middle East, North Africa and Asia, and tenders pending from Bangladesh, Morocco and Turkey. Egypt passed on a tender Wednesday, but bought 415,000 MT of SRW today, saving $37/MT. Traders are optimistic that the free fall in values could draw more demand.
  • U.S. HRW conditions improved this week, receiving above average precipitation. More is needed but weather forecasts differ on the probability of receiving moisture over the next 10 days.
  • Export sales were barely positive as Algeria and unknown destinations continue to cancel sales, taking over 250,000 MT of old crop off the books this week. While net sales of old crop were only 17,100 MT, interest in new crop remains stout with sales of 151,000 MT booked, putting total commitments above 2.4 MMT. The Philippines, Algeria and Mexico hold the largest new crop positions while a total of 24 countries have booked supplies for 2008/09. Last year, only 6 countries had booked new crop sales by this date.
  • HRS cash prices fell $2.27/bu ($83/MT) from Gulf ports and $90/MT from the PNW based on Canadian spring wheat reportedly being offered to a wider audience and traders beginning to believe HRS planted acreage will increase 4-5%.
  • Durum offers dropped nearly $200/MT (20%) this week as the trade finds more supplies. SW offers fell $59/MT on the week (although bid/offer spreads are extremely wide), reducing its premium to SRW to only 32 cents/bu ($11/MT).
  • Ocean freight rates weakened significantly this week in both the Pacific and Atlantic. The Egyptian tender indicated a $7/MT break from last week. Freight analysts are calling this the bottom of the market, anticipating a rebound as activity increases in the spring. Initial indications for freight from Duluth origin are reported as the Great Lakes are nearly thawed and shipments will begin next month.
  • The dollar exchange rate set a new record against the euro this week, dropping below $1.59 before rebounding.

File Name
PR 080320.pdf
PR 080320.xlsx
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