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September 21, 2007
(See attached file: PR070921.xls)(See attached file: PR070921.pdf)

  • Futures jumped nearly limit-up on Monday in anticipation of a huge cut in the Australian production forecast and fell Tuesday when it was confirmed. Indications from the Russian government that export restrictions will be announced next week and that Ukraine will extend its ban were discounted as widely anticipated and already priced in. Big sales announced today for Iraq and Algeria, pushed boards higher. New crop (July '08) winter wheat futures made bigger gains (up 42 cents/bu) this week as next year's race for acres heats up. From last Friday, CBOT December futures are up 28 cents/bu, the KCBT is up 29 cents/bu and the MGE rose 31 cents/bu. Corn futures are up 28 cents/bu this week.
  • Another very strong sales report marks the 8th week out of the past 11 that exceeded 1 MMT. Despite indications that sales have slowed down, traders expect this week's sales to approach the million ton mark. The 700,000 MT HRW sale to Iraq and 100,000 MT of HRW to Algeria announced today will not go on next week's report. With 8.5 months of the marketing year yet to go 88% of the USDA forecast SRW sales have been committed, 85% of durum, 71% HRW, 61% white and 60% HRS.
  • Weather situations for Argentina and Australia have diverged. Argentina has received more than a week of beneficial rainfall in key growing areas, boosting yield expectations. USDA has the crop pegged at 14 MMT, down from 15.2 last year. The Australian Bureau of Agricultural and Resource Economics (ABARE) confirmed that drought has damaged its crop, revising its production forecast down 7 MMT to 15.5 MMT. Any precipitation in the next three weeks, or lack thereof, will have a large impact on yields. Forecasts are for continued dry weather.
  • Initial acreage forecast by respected consultancy Informa Economics indicates a 3% rise in wheat area seeded for next year's harvest. USDA will release its winter wheat seedings estimate in January.
  • The SRW/corn price spread at the CBOT is unchanged from last week with nearby SRW at a $4.97 premium to corn. The HRW FOB premium to SRW is wider at 25 cents/bu ($11/MT). SW and SRW are moving together, staying at even money for the third straight week.
  • This week's USDA Grain Transportation Report outlines the challenges presented by the surge in U.S. wheat exports in its feature article. Rail rates, already high in response to strained capacity around the booming Texas Gulf export program, were pushed up further by a hurricane. Another tropical storm is on its way. Midwest barge rates fell on the southern Mississippi, down 38% from 2 weeks ago, while the northern Mississippi is up 13%. Ocean freight continued its relentless march up with the Gulf - Japan rate just short of $100/MT.
  • The U.S. Federal Reserve cut interest rates this week by an aggressive 50 basis, causing a run on the U.S. dollar, now at record or multi-decade lows against several currencies. The euro now costs more than $1.40 and the Canadian and U.S. dollars are at parity. This is seen as positive for U.S. exports as a weak currency decreases the effective import price and makes U.S. supplies more competitive on the global market.
  • Near term price direction will be highly responsive to precipitation in Australia and import demand.

USW Commercial Sales Report:

USDA Grain Transportation Report:

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