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August 8, 2008

(See attached file: PR 080808.pdf)(See attached file: PR 080808.xlsx)

  • Wheat futures continue to erode, extending the losing streak to 7 weeks as impressive exports were not enough to keep wheat from succumbing to a general commodity sell-off that took corn down 67 cents/bushel, soybeans down $1.56 and crude oil down nearly $9/barrel. Wheat fell Monday and Wednesday as spillover weakness from other markets added to bearish harvest pressure and continued reports of higher global production. Wheat rebounded independently in Tuesday and Thursday sessions on evidence of strong demand for U.S. exports, but fell sharply today on a surging dollar. For the week, the September delivery position at the CBOT was down 29 cents/bu, the KCBOT fell 19 cents/bu and the MGE was off 16 cents/bu.
  • Export sales supported prices as markets get the sense that import demand for U.S. supplies has a stronger foundation than earlier believed. Another 682,600 MT were added this week as sales of HRW continue to make up the majority of the export program, accounting for 500,000 MT of this week's campaign. Another large week for sales to Nigeria puts its pace 43% above last year as milling demand there appears to be strengthening. Demand from Mexico and Japan continues to be consistent, South Africa added nearly 70,000 MT while Iran and Cuba combined for nearly 220,000 MT. A Brazilian cancellation likely marks the end of this year's strong U.S. program there as Argentine exports have resumed, but traders report continued strong demand from the rest of Latin America as well as Iran and Iraq.
  • Winter wheat premiums strengthened at the Gulf this week on strong export demand. HRW capacity is tight on sales currently 19% ahead of last year's incredibly strong pace while the 175,000 MT sale to Egypt's GASC on Tuesday pushed SRW basis prices 5 cents/bu higher. HRW protein spreads at the PNW widened as early indications of the Montana harvest indicate lower than average protein levels. HRS activity has stalled as buyers wait for harvest. Lack of freight in the Lakes is an increasing concern as the weak dollar has slowed imports, decreasing vessel availability.
  • SRW increased its premium to corn again this week with CBOT September SRW futures now $2.67/bu over corn, up from $1.30/bu 5 weeks ago. The higher spread deters SRW feed use, which USDA forecasts will increase more than 50% above the historic record for the class.
  • SW offers weakened moderately as a wide price range was observed in trades this week. The early harvest results continue to exhibit lower than average yields while high protein levels are beginning to cause concern that the low-protein specification popular in North Asia will be difficult to achieve. SW FOB prices are down 10 cents to $8.55/bu ($314/MT) this week, $67/MT above SRW FOB Gulf prices.
  • Freight rates plummeted this week as decreased vessel demand and easing port congestion frees vessel capacity. Rates are off $7/MT in both oceans for the week, back to levels last seen in February. Indications in the Atlantic are down 20% and the Pacific is off 30% from highs seen in May.
  • The dollar surged higher today, hitting a 5-month high against the euro. Currency traders suggest that technical momentum could take the dollar below $1.50/euro, down from $1.60 just 3 weeks ago.
  • Updated USDA World Agricultural Supply and Demand Estimates will be released next Tuesday with the trade expecting increased wheat production estimates.

File Name
PR 080808.pdf
PR 080808.xlsx
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