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February 18, 2011

(See attached file: PR 110218.pdf)(See attached file: PR 110218.xls)

Highlights:
  • Wheat prices saw their largest weekly decline since mid-November of last year this week. The futures exchanges posted sharp declines on both Tuesday and Friday due to profit taking and China’s effort to tame inflation by increasing bank reserve requirements. The CBOT March contract fell 44 cents on the week, closing at $8.22/bu, while KCBT nearbys lost 43 cents, closing at $9.29/bu. MGEX had the largest loss on the week, falling 62 cents to close at $9.55/bu. Along with China’s monetary policy, South America’s new crop entering the market pressured CBOT soybean prices. The CBOT March soybean contract fell 48 cents this week to $13.68/bu. CBOT corn prices received support from strong export sales and finished the week 3 cents higher, to $7.09/bu.
  • The Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) released their February crop report this week. ABARES projected 2010/11 Australian wheat production at 26.3 MMT, 0.5 MMT less than their previous estimate released in December. ABARES left their export forecast unchanged, at 16.0 MMT. USDA currently projects Australia’s 2010/11 wheat production and exports at 25.0 MMT and 13.5 MMT, respectively.
  • USDA released their long-term agricultural projections for 2011-2020 this week. The report projected a greater-than-expected planted area for the 2011/12 U.S. corn and soybean crops, at 92 million acres and 78 million acres, respectively. The projections had a bearish effect on corn and soybean prices, and sent wheat prices lower as well due to spillover. The report projected the 2011/12 wheat planted area for the U.S. at 57 million acres, up six percent from 2010/11.
  • China’s latest efforts to control food inflation affected commodity prices this week. Rumors that China may reduce import duties on food items supported prices on Thursday. However, China’s increase in bank reserve requirements on Friday provided significant downward pressure on prices, especially soybean prices, as it could limit demand. The CBOT March wheat contract lost 28 cents on Friday, while the March soybean contract fell 36 cents.
  • The Ukrainian government announced on Tuesday that it will extend their grain export quotas for a second time. The grain export quotas, which were set to expire at the end of March, will be extended for the remainder of the 2010/11 marketing year ending in June. The quotas currently allow total grain exports of 4.2 MMT, which includes 1.0 MMT of wheat.
  • FOB basis levels were firmer this week in the Gulf due to limited farmer selling. FOB basis for HRS 13.5 climbed from $1.85/bu last week to $2.10/bu this week. HRW FOB basis was five cents higher for all protein levels.
  • In the PNW, the spread between HRW 11.5 and HRW 12.0 increased this week due to limited supplies for higher protein. The spread climbed from $0.80/bu last week to $0.95/bu this week.
  • Freight rates were up again this week with strong grain and coal demand supporting the market. The Baltic Panamax Index closed at 2,004 on Friday, up 24 percent from a week ago. The Gulf/Japan route was at $53/mt, up from $49/mt last week, while PNW/Japan was at $32/mt on Friday, up $3/mt from a week ago.

File Name
PR 110218.pdf
PR 110218.xls
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