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February 8, 2008

(See attached file: PR 080208.pdf)(See attached file: PR 080208.xlsx)

Highlights
  • U.S. futures markets locked limit-up in all three exchanges every session this week as export demand remains strong while supplies continue to dwindle. Technical trading also factors as speculative funds try to roll between exchanges and delivery months while hedgers want to exit short positions to avoid mounting margin calls. The markets will increase trading limits next week, perhaps easing gridlock in cash trade. The fall in SW prices last week provided some importers hope for catching a break on a volatile swing while the sales report indicates others just want to get covered at any cost. For the week, nearbys at the CBOT, KCBOT and MGE were all up the limit $1.50/bu.
  • Higher U.S. exports and lower stocks reported today in the USDA World Agricultural Supply and Demand Estimates were widely anticipated by the trade and did not affect markets.
  • Export sales this week of 313,000 MT remain well above the level needed to achieve the revised USDA forecast. With 17 weeks remaining in the marketing year, exportable supplies are pegged at 90,000 MT/week. Total new crop coverage reached 1.7 MMT with 155,000 MT booked this week, the highest level since 1980.
  • Trading limits at the CBOT and KCBOT will increase on Feb. 12 from 30 to 40 cents while the MGE has applied to remove limits on March delivery positions on Feb. 25. Synthetic trades, or option based trades, indicate HRS nearbys are valued as high as $21.00/bu.
  • Basis prices continue to climb in both the Gulf and PNW as exporters pry supplies from the country and compete against domestic mill demand. HRS Gulf origination basis is at $5.20/bu today after breaking the 2005 record of $2.15/bu only two weeks ago. HRW basis prices at the Gulf rose only slightly while at the PNW a protein demand shift spiked high protein HRW premiums.
  • SW prices fell $2.75/bu ($101/MT) last week as large customers declined to bid. Still lacking bids, SW prices rose slightly with other markets and on tight supplies, now valued at $14.00/bu ($514/MT), $92/MT below the Jan. 25 record high.
  • Spring wheat acreage response to current HRS prices remains unclear and analyst opinions vary. Producer intentions will be more apparent in early March when crop insurance filings are due. The USDA prospective plantings report will be released on March 31.
  • Ocean freight rates seem to have bottomed out despite demand softening on the Chinese New Year break, ending a 3-month decline. While freight offers for the Egyptian tender were a bit lower, other destinations in Africa, such as Nigeria and Morocco, remain firm. The Baltic Dry Index rose 1% from last Friday. Initial indications for Lakes open are under $100 Duluth - Rotterdam.

File Name
PR 080208.pdf
PR 080208.xlsx
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