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July 20, 2007

(See attached file: PR070720.xls)(See attached file: PR070720.pdf)

Highlights
  • A global shortage of exportable supplies becomes more evident every day, forcing importers to scramble for coverage in spite of historically high prices. The speculative funds appear unwilling to let go of longs except for brief, profit taking sell-offs. As a result, futures markets traded in a volatile range this week, maintaining 11-year record levels. For the week, CBOT September futures fell 2 cents/bu, the KCBT was off 9 cents/bu and the MGE down 6 cents/bu.
  • Corn futures fell 37 cents/bu this week with beneficial rains, slipping to a 9-month low. The corn/wheat spread at the CBOT finished the week at $3/bushel, a 30-year record and up from 50 cents/bushel in February.
  • French new crop wheat futures (November delivery) closed at a record 192 euros ($265) today. Strong import demand from North Africa, including a 299,000 MT tender from Morocco, combined with poor growing conditions and production, caused the surge. The record strength of the euro further undermines price competitiveness of European versus U.S. supplies.
  • Extreme heat in the Northern Plains comes as 95% of the HRS crop has headed. The heat could affect kernel fill, reducing yield but increasing protein. Disease potential will also be dimished. The Wheat Quality Council's annual HRS tour begins in Fargo, next Monday, which will provide a good indication of yields for this year's crop. This harvest is extremely important for meeting global demand for high protein supplies.
  • HRW quality is improving as the harvest moves north. Protein levels above 11.5% are still not being quoted, but traders believe they will be available soon.
  • This was an incredible week for U.S. export sales as Egypt booked 300,000 MT on Tuesday (60,000 MT was already in country) and 115,000 MT yesterday. Bangladesh was also in for 106,000 MT and Morocco tendered for 250,000 MT. Traders do not see demand weakening. As one would expect, capacity at port facilities is being tested, particularly in the Gulf. Availability may soon become limited.
  • In the first bearish production news in weeks, a Russian consultancy estimated a slightly larger harvest in Russia than last year. The Government of India also increased its production estimate to nearly 75 MMT from 69 last year. On the other hand, Syria reportedly cancelled nearly 400,000 MT of export contracts due to a poor harvest this year.
  • Rains in the PNW region have delayed the SW harvest the last few days but quality was not affected. With under 10% of the harvest complete, country selling is still slow. Initial samples are reportedly showing good test weights and high protein levels. Import demand remains quite strong.
  • Ocean freight rates eased this week in the Pacific by $4/MT, yet rose by $2 in the Atlantic. Reports suggest that congestion is easing in Australia while increasing in South America.

Wheat Quality Council:
http://www.wheatqualitycouncil.org/

USW Harvest Report:
http://www.uswheat.org/harvestReports/doc/8A4D289AFE9C3E4B8525731E006114E7?OpenDocument#

File Name
PR070720.xls
PR070720.pdf
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