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December 14, 2007

(See attached file: PR071214.pdf)(See attached file: PR071214.xlsx)

Highlights
  • Futures markets were chaotic this week as very thin trade brought big swings. Large gains Monday on follow-through strength from last week were wiped out after a USDA report, showing the tightest stocks in recent history, brought a "sell the fact" liquidation. Wednesday locked limit-up in the three exchanges for every old crop position. For the week, SRW for March delivery at the CBOT increased by 58 cents/bu, the KCBOT was up 49 cents/bu and MGE March futures are up 73 cents. Prices for HRS, SW and durum set new record highs again this week, as did HRW. A large increase in biofuel mandates in both the impending farm and energy bills is supporting corn and bean futures. Corn nearbys were up 21 cents/bu and soybeans 37 cents/bu for the week.
  • USDA increased its forecast for U.S. exports in this week's WASDE, bringing year-end stocks to the lowest level in 60 years. Between classes, the tight supply situation has become most evident in durum and SW, both nearly four times more expensive than in December 2005. HRS markets are also attempting to ration demand through higher prices as futures are more than twice as high as two years ago. Protein premiums rose substantially this week resulting from the tighter HRS balance sheet.
  • Bull spreading was reported (long nearby, short deferred) on improved moisture in the HRW region. Bull spreads in Minneapolis puzzled traders as reports indicate a decline in North American spring wheat acres in 2008, further tightening high protein supplies. Strong prices for barley, canola and peas, combined with lower fertilizer costs, is expected to limit spring wheat area in the coming spring.
  • This week's commercial sales were above expectations and again well above levels needed to meet the (increased) USDA export forecast. At 513,800 MT, sales were four times the 133,000 MT needed over the next 25 weeks to reach the 32 MMT export forecast. As expected, Asian demand remains consistent and SW supplies continue to tighten, pushing prices up another 70 cents/bu ($26/MT) this week. Significant origin switching and sales decreases were reported for the week, particularly concerning durum to Nigeria. Durum prices continued to ratchet up however, adding another $10/bu, putting the Gulf program price range at $20.42 to $21.10/bu ($750 to $775/MT).
  • News that the Ukraine may open its export registry earlier than previously thought was market neutral. India announcing it would tender next week for 550,000 MT was supportive. Egypt announced two tenders this week, but only booked 30,000 MT of Russian wheat.
  • Informa economics estimates that U.S. winter wheat planted area increased 8% over last year. A snow and ice event over the past week in the Plains states has helped replenish badly needed soil moisture. Another storm is expected today. Strategie Grains estimated EU-27 non-durum production up 15% from last year.
  • New crop HRS prices continue to gain on corn and soybeans. September '08 delivery HRS (MU08) is at a $4.09/bu premium over December '08 corn, up from $1.54/bu early this summer. The November '08 soybean premium over MU08 contracts has fallen from $3.66/bu in July to $1.92/bu. The SW premium to SRW opened further to $2.96/bu ($109/MT) this week after trading at parity in September.
  • Ocean freight rates weakened again this week as trade is slowing for the holidays. USDA reports that containerized grain exports to Asia this fall were 79% higher than 2006 and 149% higher than the 3-year average.

USDA World Agricultural Supply and Demand Estimates:
http://www.usda.gov/oce/commodity/wasde/latest.pdf

USW Commercial Sales Report:
http://www.uswheat.org/commercialSales/doc/AE2E97C5D05DB0FA852573B000567FDA?OpenDocument#

Agricultural Marketing Service Grain Transportation Report:
http://www.ams.usda.gov/tmdtsb/grain/2007/12-13-07.pdf

File Name
PR071214.pdf
PR071214.xlsx
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