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February 11, 2011

(See attached file: PR 110211.pdf)(See attached file: PR 110211.xls)

Highlights:
  • Wheat futures hit their highest level since August 2008 this week due to strong export demand, drought conditions in China, and spillover from corn following the release of USDA’s World Agricultural Supply and Demand Estimates (WASDE). Prices came back down towards the end of the week, however, from profit taking, a stronger dollar, and export sales that fell below trade expectations. Overall, the CBOT March contract gained 13 cents, to $8.67/bu. KCBT and MGEX nearbys were up 29 and 30 cents to close at $9.73/bu and $10.17/bu, respectively. Corn prices surpassed $7.00/bu this week after USDA projected 2010/11ending stocks in the U.S. at their lowest level since 1995/96. The CBOT March corn contract gained 28 cents this week, closing at $7.06/bu. Soybean prices were lower this week as a firmer dollar and favorable weather conditions in Argentina and Brazil pressured prices. The CBOT March soybean contract lost 17 cents, to $14.16/bu.
  • The U.S. Department of Agriculture released their February WASDE report this week. USDA projected a slight reduction in 2010/11 global wheat production, which fell 0.4 MMT to 645 MMT. The reduction was primarily due to a lower forecast in Ukrainian output, which fell from 17.2 MMT to 16.9 MMT. USDA also lowered their forecast for Ukrainian wheat exports for 2010/11, from 6.0 MMT to 5.5 MMT. While USDA’s adjustments to their wheat projections were minor, the reduced estimate for 2010/11 U.S. corn ending stocks sent corn prices higher. USDA projected U.S. corn ending stocks at 17.1 MMT, a nine percent decrease from last month’s estimate of18.9 MMT. Spillover from the gains in corn supported wheat prices, which gained nearly 12 cents on the CBOT nearby contract.
  • Strong export demand from North Africa and the Middle East supported prices this week. Egypt, Jordan, and Iraq all purchased U.S. wheat this week, while Turkey, Tunisia, and Algeria issued tenders with bids due next week.
  • Drought conditions continue to hamper some of China’s major wheat-producing areas. The Food and Agriculture Organization issued an alert on Tuesday that stated the drought might have affected 5.16 million hectares out of 14 million hectares planted in China’s winter wheat-producing provinces. The FAO noted the situation could become critical if the drought continues into the spring.
  • In its latest efforts to tame inflation, China’s Central Bank raised interest rates for the third time since October on Tuesday. The People’s Bank of China increased the one-year Yuan lending rate from 5.81 percent to 6.06 percent. The rate increase was bearish for commodity prices as a tighter Chinese monetary policy could potentially limit Chinese demand.
  • U.S. export sales came in below trade expectations again this week. For the week ending February 3, 2011, USDA reported net sales at 391,300 MT, which were below trade expectations of 500,000 to 700,000 MT. Increases were reported for Iraq (105,999 HRW, 6,016 HRS), Mexico (57,608 HRW, 13,887 HRS, 35,008 SRW), Nigeria (90,327 HRW), Chile (49,700 HRW), and Guatemala (17,300 HRW, 8,300 HRS, 6,300 white).
  • The ICE Dollar Index climbed to its highest point in the past three weeks on Friday. The index stood at 78.51 on Friday, up from 78.04 a week ago.
  • Increased Chinese fixtures following the Lunar New Year supported freight prices this week. The Baltic Panamax Index stood at 1,620 on Friday, up from 1,348 a week ago.

File Name
PR 110211.pdf
PR 110211.xls
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