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April 11, 2008

(See attached file: PR 080411.pdf)(See attached file: PR 080411.xlsx)

  • Markets fell this week despite a bullish USDA stocks estimate, threats of trade disruption in major exporters and another strong U.S. sales report. Trading continues to be choppy and volatile while profit taking and technical selling factored heavily this week. Bearish fundamentals included optimistic global production estimates and rains in the HRW region. Nearby winter wheat futures have fallen more than $3/bu (26%) in the past 4 weeks. The Minneapolis May fell most of the week after closing the 60 cent/bu limit higher in 3 sessions last week and is now over $6/bu off the $19/bu contract high hit on February 27. For the week, May delivery futures at the CBOT were down xx cents/bu, the KCBOT fell 75 cents and the MGE was 43 cents/bu lower. Corn nearbys fell this week by 14 cents/bu while soybeans were up 56 cents/bu.
  • The USDA World Agriculture Supply and Demand Estimates surprised the trade by keeping U.S. ending stocks unchanged and increasing the export forecast by 1.4 MMT. U.S. exports in 2007/08 are expected to be the highest in 15 years and 7 MMT (25%) above the 10-year average. This week's report had little influence on prices as markets are already looking to new crop and the May release showing the initial forecast for 2008/09.
  • U.S. export sales remain robust as old crop bookings exceeded 450,000 MT last week. USDA estimates exportable supplies at 775,000 MT with 8 weeks left in the marketing year. New crop sales continue to be robust with over 300,000 MT added last week, putting sales for 2008/09 over 3 MMT. Currently, 30 countries have booked new crop wheat compared to 12 last year.
  • Export restrictions from Kazakhstan are back on the table as the Prime Minister told reporters he will examine proposals to suspend grain exports or introduce export duties in order to tame domestic inflation, reversing a previous decision not to curb exports. Renewed strike in Argentina has been threatened as farm groups met with the President today to discuss government proposals for the agriculture sector. Although the export registry is now officially open, "procedural constraints" have prevented any sales. The Ukraine resumed exports, shipping 136,900 MT in March. USDA reduced the Ukrainian export forecast to 500,000 MT from 3.4 MMT last year.
  • The global production outlook for 2008/09 remains optimistic with French agency ONIGC forecasting production above 635 MMT, 28 MMT above 2007/08 and 44 MMT above the 10-year average. In February, USDA forecast this year's harvest at 645 MMT compared to IGC's forecast last month for 646 MMT. Positive reports were released this week on German production, up 14%, Bangladesh, up 80%, and Romanian production expected to more than double. On the other hand, reports indicate Turkish production is expected to fall by 30% due to drought, Pakistan's harvest will fall by 2 MMT and poor weather will keep Indian production unchanged.
  • Canadian acreage is expected to increase this year according to the results of a farmer survey in Canada's largest crop-producing province, but by a much smaller degree than anticipated by the trade. Total wheat acreage in Saskatchewan is expected to increase by 7% with durum up 9% and spring wheat up 3%.
  • HRS cash prices weaker on the fall in futures and softening basis. Demand appears to be waning as Asia seems covered, Latin American importers are substituting HRW for spring wheat and Canadian supplies are reportedly more available.
  • HRW conditions stabilized and likely improved this week with significant precipitation arriving in the Southern Plains. Dry weather is forecast through the weekend and severe moisture deficits persist in southwestern Kansas, southeastern Colorado and the Oklahoma panhandle. The eastern part of the Texas panhandle benefited from the recent rains. The SRW belt continues to be inundated by rain, but analysts report few acres have been lost, particularly as a percentage of total SRW planted area. Snowfalls in the Northern Plains will benefit HRS planting and HRW conditions there.
  • Ocean freight rates in the Pacific continue to soften slowly with no clear direction as demand from India and China has slowed. Demand in the Atlantic has increased markedly as shippers race to preempt any impending strikes in Argentina, strengthening rates out of the Gulf. Lakes rates are reported but should be considered nominal, with wheat movement lacking until new crop.
  • Near term price direction will be driven by weather and new crop production prospects. Markets will be supported by any unexpected import demand for old crop supplies.

File Name
PR 080411.pdf
PR 080411.xlsx
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