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May 2, 2008

(See attached file: PR 080502.pdf)(See attached file: PR 080502.xlsx)

Highlights
  • Futures were mixed this week with the sole support for SRW coming from corn prices while import demand kept HRW firm and poor weather supported Minneapolis. Precipitation in the Southern Plains is helping the HRW crop but increasing corn planting delays as the same weather systems hit the Midwest. The corn/wheat futures spread at the CBOT has fallen from $7.55/bu to $1.94/bu in 6 weeks. Strength of the U.S. dollar was credited with a general commodity sell-off from gold to petroleum while lack of resolution in the Argentine export situation shifted considerable Brazilian demand to North America. For the week, May delivery futures at the CBOT were down 5 cents/bu, the KCBOT rose 43 cents and the MGE was 35/bu higher. Corn nearbys gained 25 cents/bu while soybeans fell 33 cents/bu as corn planting delays could shift acres to beans.
  • U.S. export sales of old crop supplies continue slow and steady with 176,100 MT booked last week. Traders wonder if HRS exports will fall short of the USDA forecast, still needing 271,000 MT of sales over the next 5 weeks. On the other hand, old crop HRW sales already exceed the forecast by 315,000 MT as demand from Nigeria, Brazil and Central America remains consistent. Traders are optimistic that Iraq will take a sizeable chunk of new crop HRW in its tender this weekend. Both Iraq and Brazil booked new crop HRW coverage last week, pushing total 2008/09 sales to 3.6 MMT, compared to 925,000 MT by this point last year. Sales to Brazil are expected to continue through July as Argentina remains closed and Black Sea supplies are not available until August.
  • SRW values are falling fast with the U.S. harvest to begin in 3 weeks and global supplies promise to exceed import demand. Egyptian domestic procurement is reportedly well above normal, promising to keep import needs minimal through the summer months when U.S. SRW is most competitive, prior to Black Sea supply availability. Egypt has accounted for 49% of SRW sales this year. With Ukraine production forecast up 5 MMT (37%) this year, Canadian winter wheat plantings up 65% and SRW plantings up 24%, the impending harvest pressure is rising. As the price spread against corn falls, SRW feeding has already been reported. Domestic feed mills could represent a significant segment of SRW demand this year.
  • Crop concerns focus on corn plantings as Monday's report showed seeding progress at 10% completed, compared to 20% last year and the 35% average. Continued wet and cool conditions are forecast for the Midwest next week. The SRW crop would also benefit from a drier pattern, but conditions are not yet causing concern with today's Informa economics forecast showing SRW production up 49% over 2007/08. Spring wheat plantings are behind normal with 34% planted compared to the 40% average as the eastern HRS region is very wet. Conditions in western North Dakota and eastern Montana, on the other hand, are extremely dry. The USDA conditions report continues to be unresponsive to considerable rainfall in the Central and Southern Plains with winter wheat gaining only 2 points in the good/excellent category this week. The western parts of the HRW belt continue to be shortchanged on moisture with severe drought lingering in the Oklahoma and Texas panhandles, southeast Colorado and southwest Kansas.
  • SW prices plummet as export demand has been minimal and SRW values weaken. Japan will not tender for the second week in a row, limiting current demand Korea's purchase of 1,800 MT this week. Statements by President Bush supporting increases in food aid have made the trade wary of another release from the Bill Emerson Humanitarian Trust, raising the risk of over 250,000 MT of SW being made available to the market. Old crop supplies are off over $3/bu in 3 weeks to $9.25/bu ($340/MT). New crop SW values remained generally firm at $8.25/bu ($303/MT).
  • Ocean freight rates surged $5/MT in the Atlantic this week, putting rates in the Gulf back to October 2007 record highs. The Pacific was unchanged for the week as demand slipped leading up to the May 1 holiday weekend and the long Japanese break.
  • The USDA 2008/09 forecast will be released in next Friday's World Agricultural Supply and Demand Estimates, but will not include a by-class breakout until the July release.

File Name
PR 080502.pdf
PR 080502.xlsx
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