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April 5, 2007
(See attached file: PR070405.pdf)(See attached file: PR070405.xls)

Grain futures fell through Tuesday on the 15% corn acreage expansion forecast in USDA's prospective plantings report. On Tuesday corn nearbys hit $3.43, 94 cents/bu (24%) lower than its late February high. With CBOT wheat off 50 cents/bu, markets found cold weather in the Plains reason enough to rally on Wednesday and Thursday. Markets are closed tomorrow. For the week, CBOT SRW nearby futures rose 7 cents/bu while both the KCBT and the MGE ended 13 cents/bu higher than last week. Corn futures ended 9 cents/bu down from last week.

As in North America, spring wheat production in Kazakhstan is expected to fall this year as producers switch to corn and other crops. This week a Kazakh agriculture official forecast a 3% (370,000 ha) decline in spring wheat planted area. Last week USDA estimated a 7% (442,000 ha) decline in U.S. spring wheat planting while an Ag Canada forecast last month showed a 14% (1.2 million ha) decline in Canada.

USDA's crop progress report shows U.S. winter wheat in historically good condition as ratings improved since the fall, a very unusual occurrence. The HRW crop is being threatened by freezing temperatures through the weekend in Kansas and Oklahoma, perhaps reaching as far south as north central Texas. Following a warm March, plant development is unusually advanced, making the crop more susceptible to freeze damage. Jointing wheat can withstand temperatures around 20 degrees F (-6C) while heading wheat can be harmed by readings below 30 degrees F (-1C).

International weather notes: Morocco finally received precipitation desperately needed for its winter wheat crop, but it may be too late to save the already headed plants. Dry conditions in China led private forecasters to call for a 4 MMT decrease in production.

USDA attaché report on Ukraine shows a 20% increase in winter wheat production over last year, expected to result in a 3 MMT production increase and 2 MMT increase in exports. The report also comments that a new coalition government formed last year "has moved policy towards more government intervention and reduced free market measures. The best example was the introduction of export quotas and licensing for grains."

Durum prices are unchanged this week, ranging from $6.12 to 6.80/bu ($225 to $250/MT) for number 1 specifications. The premium for Gulf origination is 83 cents/bu ($31/MT).
U.S. SW prices were up 2 cents/bu from last week, again decreasing the SW premium to SRW to $1.39/bu ($51/MT).

Barge routes from Minneapolis have reopened for the spring. The rate from the Twin Cities to NOLA is $20/MT, $11/MT (36%) lower than the last indications from November. At $41/MT rail rates are 10% lower than last year on the North Dakota - Houston (HRS/durum) route while the Kansas City - Houston rate is 5% higher than this month last year.

Ocean freight rates remain in orbit this week, credited primarily to Chinese iron ore imports. India, the third-largest supplier to China's voracious iron ore demand, imposed a 300 rupee/ton ($7) export duty on iron ore in March, to encourage domestic steel production. Chinese steel makers shifted imports to its second largest iron ore supplier after Australia, Brazil. The longer sailing distance has reduced global vessel availability. Also servicing China's mineral demand, ship brokers report that 100 of the 700 global capesize fleet (>150,000 MT capacity) are anchored off the Australian port of Newcastle. The soaring rates for capesize ships has lifted rates for panamaxes and smaller size vessels as charterers split cargoes.

NASS Prospective Plantings Report:

NASS Crop Conditions Report:

USDA Ukraine Attaché Report:

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