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August 15, 2008

(See attached file: PR 080815.pdf)(See attached file: PR 080815.xlsx)

  • Futures shot up this week, gaining almost $1/bu across classes by Thursday's close. A decidedly bearish WASDE report showing increases in U.S. ending stocks and world production was followed by limit higher closes Wednesday. The standard explanation of technical trading and outside markets was cited for prices moving against fundamentals. Dollar strength and crude oil weakness led to wheat diving today despite USDA reporting an Iran purchase in excess of 690,000 MT this morning. The weekly export sales report released yesterday shows resilient demand for U.S. supplies. For the week, the September delivery position at the CBOT was up 59 cents/bu, the KCBOT rose 60 cents/bu and the MGE was up 54 cents/bu. Corn finished 31 cents/bu higher, soybeans gained 35 cents while crude oil fell $3/barrel.
  • Strong export pace continues as buyers took advantage of last week's futures price lull to increase bookings. Only 10 weeks into the marketing year more than 50% of the USDA export forecast has been committed. Including today's Iranian purchase, HRW is 58% booked while 77% of forecast SRW exports are sold. The other 3 major classes are 33 to 35% sold. In order to meet the USDA forecast, sales must average half of this week's 650,000 MT.
  • Consistent demand from Nigeria is surprising the trade with nearly 90,000 MT of HRW booked this week, putting their buying pace for the class 46% above last year. The report showed Iran took another 60,000 MT of HRW, which combined with today's sale to put them over 880,000 MT for this marketing year. Sales to Spain of over 32,000 MT of both SRW and HRS, as well as an Italian purchase of 37,000 MT of U.S. durum, led to speculation on European quality problems.
  • USDA's World Agricultural Supply and Demand Estimates update this week increased global production by 6.5 MMT from last month, putting the global harvest 60 MMT above last year and 20 MMT above 2008/09 consumption. A nearly 1 MMT reduction in SRW feed use pushed U.S. ending stocks of the class up 3 times higher than last year and nearly double the 10-year average stock level. The SRW futures carry to deferred months is stronger than for corn or soybeans, increasing the likelihood of large-scale stock building. The forecast for U.S. exports was left unchanged.
  • Ukraine quality problems are considered a reality as much of the wheat growing region has received 5-9 inches (125 to 225 mm) of rainfall in the past 3 weeks. UkrAgroConsult reduced its estimate for the share of milling wheat in this year's wheat crop to 30%, the lowest in a decade and down from 72% last year. USDA increased its Ukrainian export forecast to 8.5 MMT from under 2 MMT last year.
  • Protein premiums in the PNW took off this week with the SW harvest averaging much higher than normal protein levels while HRS and HRW levels are lower. SW 9.5% maximum protein grain jumped to a 45 cent/bu premium, from 15 last week, while 8.5% is at 85 cents/bu. The harvest in Montana, the major source for PNW HRW, is well below average, putting 13% protein grain at a $1/bu premium over 11.5%, up from 35 cents last week. The HRS harvest in Eastern North Dakota has gone well while yields and test weights have been lower in the west, typically the higher protein areas. HRS 14% protein grain moved to a 15 cent/bu premium over 13.5% from 5 cents last week.
  • SW offers nearly unchanged this week as today's CBOT sell off countered slow country movement and harvest yields that remain disappointing. Yields are improving somewhat as the harvest reaches fields at higher altitudes, but remain lower than hoped. SW FOB prices rose 5 cents to $8.60/bu ($316/MT), $44/MT above SRW FOB Gulf prices.
  • SRW premium over corn continues to increase with the CBOT September SRW futures now $2.95/bu over corn, up from $1.30/bu 6 weeks ago.
  • Freight rates rebounded this week with rate indications up $6/MT on Gulf rates while the Pacific is up $4/MT.
  • The dollar continued to climb this week against nearly every currency, surging to a 6-month high $1.47/euro. The U.S. dollar's popularity among traders reportedly stems from the European Central Bank's single inflation mandate heightening concern that economic growth in Europe will remain stagnate as commodity prices remain strong.

File Name
PR 080815.pdf
PR 080815.xlsx
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