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July 25, 2008

(See attached file: PR 080725.pdf)(See attached file: PR 080725.xlsx)

Highlights
  • Wheat futures finished mixed this week, remaining remarkably strong as corn and soybeans dove with crude oil. Progress made on legislation setting position limits on commodity trading may have at least partially motivated liquidation of row crop futures. Fund positioning in wheat futures was already largely short, keeping wheat supported during the steep commodity rout. Brisk export sales and slight strengthening of the dollar provided some support while fundamentals remained objectively bearish as rains in Australia added to growing optimism for global production and combines roll through the Northern Hemisphere. For the week, the September delivery position at the CBOT rose 7 cents/bu, the KCBOT fell 6 cents/bu and the MGE was off 2 cents/bu. Corn prices were down 32 cents/bu while August delivery soybeans declined 71 cents/bu.
  • Another big week for export sales is not abnormal for this time of year as competing exporters are just beginning harvest, still lacking exportable supplies, but Egypt's purchase of 115,000 MT of SRW was surprising considering the large premium for SRW over Black Sea supplies in that market. Russian ports might be at full capacity on recent sales to Egypt, South Korea, Syria and likely Iran. There is also some uncertainty regarding the quality of the Black Sea crop, leaving traders to wonder if the current sales pace could remain steady through the fall, or if September and the mammoth EU and Black Sea harvests will bring a sharp decline in export demand. Traders report stout demand continuing in the near term. Sales to Brazil go on, but should revert back to Argentina as the export tax situation becomes resolved.
  • Gulf loading snarled on closure of the Mississippi River and a hurricane striking West Texas. A fuel barge sunk in the Mississippi, dumping 400,000 gallons of oil into the river and halting all vessel traffic in the lowest 100 miles of the river. With nearly all of the export elevators north of the spill, elevators can receive barge shipments, but cannot load ocean vessels. This has resulted in an unusually wide 30 cent/bu spread in FOB export offers for SRW between traders. The river should be reopened in a few days according to Port officials. Hurricane Dolly struck Corpus Christi, leading to some short-term closures of export elevators in the important West Texas Gulf region.
  • SW prices continue to fall despite initial harvest yields coming in lower than expected. The "million dollar rains" that the PNW reportedly received did not benefit the crop as much as hoped with yield results starting below average. Optimism remains that yields will improve, particularly as combines reach the Palouse in Washington. Export prices move lower in search of demand as rains moved through the majority of Australian growing regions, just in time to stabilize yields.
  • Protein premiums continue to fall as the HRW crop is averaging 12.4% this year compared to the 2007/08 average of 11.6%. Price indications for 12.5% protein are included on the report for the first time since June 2007.

File Name
PR 080725.pdf
PR 080725.xlsx
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