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July 16, 2010

(See attached file: PR 100716.pdf)(See attached file: PR 100716.xls)

Highlights:
  • Wheat prices continued surging this week as extremely hot temperatures and drought conditions continued in the Black Sea region and Western Europe. Futures contracts reached a 13-month high on Thursday following further reductions in production forecasts by many analysts for the EU, Russia, and Kazakhstan. A weaker dollar also supported prices. The CBOT September contract led the way, gaining 49 cents on the week to close at $5.87/bu. MGEX nearbys gained 48 cents, closing at $6.11/bu, and KCBT was up 45 cents, to $5.99/bu. A hot and dry weather forecast in the U.S., along with strong export demand, pushed both corn and soybean prices higher on the week. The CBOT September corn contract gained 11 cents, to $3.94/bu, while the soybean August contract closed at $10.19/bu, up 26 cents from last week.
  • Strategie Grains, a French grain analyst, reduced their 2010/11 EU soft wheat production estimate by 3.6 MMT, putting the projection at 129.5 MMT, slightly below last year’s 129.8 MMT. The reduction is due to the combination of a heat wave in Western Europe (especially France, Germany, and the UK) and excessive rainfall in Eastern Europe (Bulgaria, Hungary, and Romania).
  • Informa Economics reduced their 2010/11 Russian wheat production forecast by 2.0 MMT, to 51.0 MMT, due to extremely dry conditions. Informa noted that rainfall is 30 percent below normal in Russia’s winter wheat region and 25 percent below normal in the spring wheat-producing area. Informa also reduced their Kazakh production estimate by 3.0 MMT, to 11.0 MMT, which would be 6.0 MMT less than last year and 22 percent below the five-year average.
  • HRS Gulf basis levels fell sharply this past week due to increased farmer selling following the run-up in futures prices and falling barge rates. HRS Gulf basis for 13.5 protein fell by approximately 25 cents, from $1.60/bu last week to $1.35/bu this week.
  • The CBOT SRW/corn spread has climbed sharply in recent weeks following the large gains in wheat futures. SRW/corn spread currently stands at 1.93/bu, up from 95 cents/bu on June 4.
  • A weaker dollar provided support to commodity prices this week. The Dollar ICE Index fell to as low as 82.29 on Thursday, its lowest point since early May. The index stood at 82.56 on Friday, down from 83.95 a week ago.
  • Freight rates climbed higher this week after falling for three consecutive weeks. The Baltic Panamax Index closed at 2,092, an eight percent gain from last week. Destination rates were also higher, with Gulf/Japan at $55/mt and PNW/Japan at $31/mt.

File Name
PR 100716.pdf
PR 100716.xls
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