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January 14, 2011

(See attached file: PR 110114.pdf)(See attached file: PR 110114.xls)

Highlights:
  • Wheat futures traded mixed this week. Fund rebalancing pressured prices early in the week, but spillover from corn and soybeans following the release of the World Agricultural Supply and Demand Estimates (WASDE) on Wednesday pushed prices higher. A weaker dollar also provided support, while continued rainfall and flooding in Australia provided support to the higher protein KCBT and MGEX exchanges. Overall, the CBOT March contract was one cent lower from a week ago, closing at $7.73/bu. KCBT and MGEX nearbys gained on the week, with KCBT gaining 13 cents and closing at $8.60/bu. MGEX gained 19 cents, to $8.90/bu. Corn and soybean prices climbed sharply higher after USDA projected reduced output and lower ending stocks for both crops. The CBOT March corn contract gained 53 cents, to $6.48/bu and the soybean nearby contract gained 48 cents, to $14.06/bu.
  • The USDA increased their 2010/11 U.S. wheat export projection in their January WASDE report. USDA pegged U.S. exports this year at 35.4 MMT, an increase of 1.4 MMT from their previous estimate. If realized, that would be the highest total since 1992/93. U.S. ending stocks were projected lower, by 1.1 MMT, to 22.3 MMT. USDA’s global production forecast for 2010/11 fell by 0.7 MMT, to 646 MMT, due to reduced projections for Australia and Kazakhstan. USDA also reduced their Australian export forecast, from 15.0 MMT to 13.5 MMT.
  • USDA released their 2011 Winter Wheat Seedings report this week. USDA projected total U.S. winter wheat plantings at 41.0 million acres, an increase of 10 percent from 2010 plantings, but two percent below the five-year average. Hard red winter acreage totaled 29.6 million acres, up four percent from a year ago. Soft red winter acreage was up substantially from last year, by 47 percent, and reached an estimated 7.8 million acres. Winter white wheat plantings were also up, by four percent, to 3.7 million acres.
  • The Buenos Aires Grain Exchange increased their 2010/11 Argentine wheat production estimate again this week, by 0.5 MMT, to 15.0 MMT. USDA also increased their wheat production estimate for Argentina this week, from 13.5 MMT to 14.0 MMT.
  • Argentine farmers announced they would halt the sale of wheat, corn, and soybeans next week to protest the Argentine government’s export quotas. The strike is expected to last a week. The Argentine government earlier this week approved export licenses for an additional 3.0 MMT of wheat, bringing the 2010/11 total to 7.0 MMT.
  • Drought conditions continue to affect China’s winter wheat crop. One analyst projects China’s output may fall by 1.5 MMT if drought conditions continue through March. The provinces most affected by the drought conditions (Shandong, Henan, and Hebei) account for approximately half of China’s total wheat production.
  • Protein premiums out of the Gulf were higher this week due to limited farmer selling and strong domestic demand. FOB Gulf basis for 13.5 spring wheat was $1.85/bu this week, up from $1.65/bu a week ago. Gulf HRW protein premiums were also firmer, with FOB basis for 12.0 HRW at $0.75/bu, compared to $0.70/bu last week.
  • The CBOT March corn/wheat spread narrowed considerably this week due to the significant gains in corn following USDA’s WASDE report. The spread stood at $1.79/bu a week ago and fell to $1.25/bu on Friday.
  • Spreads between CBOT and the higher protein KCBT and MGEX exchanges continued increasing this week due to ongoing quality concerns in global milling wheat supplies. The CBOT/KCBT March contract spread climbed to $0.87/bu this week, up from $0.72/bu a week ago. The CBOT/MGEX March spread reached $1.17/bu on Friday, compared to $0.96/bu last week and $0.83/bu at the beginning of January.
  • The Dollar ICE Index was sharply lower this week. The index fell to 79.16 on Friday, losing two percent from last Friday’s close and reaching its lowest point since the beginning of January.
  • Baltic Dry Index fell to a near two-year low due to cancelled tonnage out of Australia. The BDI closed at 1,439 on Friday, down from 1,519 last week. The Baltic Panamax Index was also lower, closing at 1,923, compared to 1,936 a week ago.

File Name
PR 110114.pdf
PR 110114.xls
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