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March 23, 2007
(See attached file: PR070323.pdf)(See attached file: PR070323.xls)

Wheat futures are following corn. Markets perceived a lack of news this week, keeping volumes low. CBOT SRW nearby futures netted a 0.75 cent/bu gain over last week. The KCBT was down 1.75 and the MGE ended down 2 cents/bu. CBOT corn rose 3.75 cents from last Friday's close.

Growing conditions are ideal in most of the Southern Plains with especially optimistic reports coming out of Kansas. The SRW belt is also looking great with the exception of some late-seeded plants in the northern tier. The PNW appears to be in good shape, but need timely rains between now and the June harvest.

Morocco finalized a 200,000 MT purchase, initially announced in February, of U.S. 'soft' (common or non-durum) wheat, that included HRW, HRS and SRW. U.S. wheat imports are subject to preferential duties under a free-trade agreement ratified in 2006. Delivery terms of the tender indicate shipments will come from old crop supplies. Egypt booked 60,000 MT SRW this week.

The sales to Northern Africa provided no support to SRW basis prices which are currently at option (0 cents/bu) the CBOT May for old crop, down from 52 cents/bu in November and 25 cents/bu a month ago. New crop SRW is offered as low as 20 cents/bu under the CBOT July futures. The price survey showed a 10 cent/bu spread between trader offers. Low barge rates are allowing traders to keep basis low, currently 6 to 20% lower than last month and 18 to 36% ($2 to $4/MT) below last year.

The Egyptian tender this week was indicative of supply situation in major exporters. No offers were made of wheat from Europe, Australia, Ukraine, Argentina or of U.S. SW. Competitive offers of Canadian eastern SRW, U.S. SRW and Russian wheat were made.

Supply situation in Europe appears tight with prices at 2-month highs and U.S. traders reporting increased dialogue across the Atlantic. Sales to the EU are 48% below last year. Ice breakers are currently in the Lakes with the first wheat shipments scheduled for early next week.

U.S. SW prices shot up $13/MT this week on short supplies. Many importers have coverage through May, but June will be a very expensive month to put on coverage. July will be the earliest new crop sold. The lack of a SW offer in this week's GASC tender is a very rare event. The SW premium to SRW at $1.49/bu ($55/MT) is now academic as SW is now the most expensive class in the U.S...a big turnaround from October 2006 when SRW was offered at a 61 cents/bu ($22/MT) premium to SW.

Ocean freight rates continued to decline this week off multi-year highs. Pacific Ocean rates fell $1/MT from last week to $43/MT for shipments from Portland to Japan, $21/MT (91%) higher than this week last year and $9 higher than last month. Rates in the Gulf are down $2/MT from last week, $29/MT higher than last year. Rates for Lakes vessels at the open are reported this week with initial indications 8% above the exorbitant rates at the close last December.

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