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October 5, 2007
(See attached file: PR071005.xls)(See attached file: PR071005.pdf)
  • Profit taking and technical selling dominated this week in volatile trade that included a limit-down session. A broad commodity sell-off was noted with oil losing $3/barrel. Fundamentals remain generally bullish with another hefty U.S. export sales report and Australia still very dry. From last Friday, CBOT December futures are down 49 cents/bu, the KCBT fell 35 cents/bu while the MGE fell only 15 cents/bu. Corn futures are down 31 cents/bu this week.
  • With nearly 600,000 MT of HRW booked by Algeria, this week's sales report approached 1.6 MMT, continuing the trend of extremely strong export demand having now exceeded 1 MMT for 10 of the past 13 weeks. Sales totaling 374,000 MT for the 2008/09 marketing year were reported this week, taking new crop sales to nearly 600,000 MT compared to 45,000 this week last year, as importers take advantage of the large futures inverse. Although new crop prices have risen, nearbys have risen much more. This summer, nearby SRW December '07 delivery was at a 49 cent premium to the June '08. Today it is at $2.04/bu, down from $2.40 last week.
  • Price spreads between classes have shifted export demand from SRW to HRW and HRS. As the most liquid market, the CBOT normally receives the most interest from general commodity investment funds pushing SRW prices up. During the past 5 weeks more than 4.3 MMT HRW were sold, over ten times more than SRW. CBOT nearbys closed at a 5 cent/bu discount to the KCBT today, from a 44 cent premium in August.
  • Nearly 1.7 MMT of HRS were sold over the past 5 weeks, sparking a 15 cent/bu jump in basis prices at the Gulf and Lakes ports and 25 cents in the PNW. Traders anticipate further strengthening in the near term. The HRS production estimate revised down by 656,000 MT last week is also bullish.
  • SW and durum are now trading in their own ranges with global supplies lacking while global demand is not. Without Australian competition, SW is filling Asian demand. With two-thirds of the marketing year to go, nearly 70% of forecast SW sales have already been committed. Forecast durum exports are 93% committed. Both SW and durum are over 3 times more expensive than in January 2006.
  • Bearish fundamentals included a small increase in estimated Canadian production by Statistics Canada while the trade expected a decrease, continued excellent weather in Argentina and a small Egyptian tender that was sourced solely from Russian wheat priced more than $30 below SRW.
  • The SRW/corn price spread at the CBOT fell this week with December SRW now at a $5.48 premium to corn. The HRW FOB premium to SRW nearly doubled to 33 cents/bu ($12/MT). The SW premium to SRW is now $1.35 cents/bu ($28/MT) from near-parity only 2 weeks ago.
  • The U.S. dollar rebounded this week against most currencies except the Canadian dollar. The euro is back down to $1.41 while the looney is now stronger than the U.S. dollar.
  • Next week, markets will expect a U.S. export sales report (released Friday due to the holiday) showing reduced demand as competing global supplies come on line. The USDA World Agricultural Supply and Demand Estimates will also be released Friday.

USW Commercial Sales Report:

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