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April 4, 2008

(See attached file: PR 080404.pdf)(See attached file: PR 080404.xlsx)

  • Market action was a roller coaster again this week, falling sharply on bearish USDA stocks and plantings reports through the first two sessions of the week before a spate of import demand on Tuesday evening pushed all positions back up 30-60 cents. Thursday was tranquil in the winter wheat markets while the Minneapolis May locked limit up, ostensibly on bull spreading but just as likely a hedger trying to exit a short position. All 3 markets were much higher today, again credited to technical trading and fund buying but strong import demand and less than ideal weather are supportive. For the week, May delivery futures at the CBOT were off 15 cents/bu, the KCBOT rose 6 cents and the MGE was 81 cents/bu higher. Corn nearbys were up 38 cents/bu and soybeans rose 10 cents/bu.
  • The USDA planting intentions report surprised the trade with the highest acreage in a decade and a 7% increase in HRS seedings. The SRW planting estimate was increased, now 24% above the area planted for the 2007/08 campaign and the highest planted area since the fall of 1995. HRW plantings were down 1%, but 4% above the recent 5-year average. Producers reportedly shifted acres from HRW back to SW in the PNW, pushing SW acreage up 9% above last year. Durum plantings are expected to rise 22%.
  • Sales continue to exceed the pace needed to meet the USDA export forecast. With 267,200 MT of old crop booked last week, only 431,000 MT remains to be marketed over the next 9 weeks. The commercial sales report does not include export donations which currently exceed 435,000 MT. New crop sales continue to be robust, now totaling 2.7 MMT with the Philippines, Mexico and Egypt showing the largest interest.
  • Import demand stronger as importers stepped in to take advantage of the early week futures sell-off. Brazil, the world's second largest importer, has sourced several shipments from North America as the Argentine export registry remains closed. Depending upon when Argentina decides to reopen exports, trade analysts expect as much as 1 MMT of Brazilian demand will be sourced from the U.S. and Canada in 2008/09.
  • Excitement in HRS futures might continue for some time with the crop yet to be planted and new crop harvest several months away. HRS futures firmed despite seeding intentions exceeding trade estimates and reports that Canadian old crop offers are becoming increasingly aggressive. Locked limit up for 2 straight sessions this week, the Minneapolis May position (MK08) shows signs of echoing the fireworks seen in the March.
  • Winter wheat futures carries increasing as SRW and HRW are beginning to bridge the old/new crop frontier. Old crop supplies appear ample to meet demand while new crop SRW is just 45 days away. Meanwhile, demand during the early months of new crop is strengthening, long before competitive supplies become available. Basis prices are inverted, keeping Gulf cash prices flat through deferred months. June SRW basis offers increased this week from -70 cents/bu to -35 cents. The previous record low export FOB basis at Gulf ports was -16 cents/bu set in 1999.
  • SW offers higher by $1/bu with the bid/offer spread at $2.50. Exporters are being very cautious in pricing remaining tight supplies.
  • HRW conditions worsened this week in top producer Kansas as dry conditions are adversely affecting southeast Colorado, southwest Kansas and the panhandles of Oklahoma and Texas. In Kansas 44% of the crop is rated good to excellent, down from 48% last week. While slightly improved this week, the crop in the third largest HRW producer Texas is in poor condition with only 19% of the crop in good to excellent condition compared to 16% last week and 67% last year. Informa economics forecasts Texan production will decline nearly 40% from last year while U.S. production of all classes will be 15% higher than last year and the largest harvest in a decade.
  • Ocean freight rates weakened all week until the end of the Argentine farmer strikes rejuvenated the market. Although grains makes up a small percentage of dry bulk freight shipments, the end of the strike caused an immediate rate resurgence in the Gulf, ending 3 weeks of declines, leaving rates unchanged for the week. Rates in the Pacific continue to erode, losing $3/MT this week.

File Name
PR 080404.pdf
PR 080404.xlsx
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