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April 18, 2008

(See attached file: PR 080418.pdf)(See attached file: PR 080418.xlsx)

Highlights
  • Markets fell again this week as technical selling and expectations for a record global harvest continue to weigh on prices. The U.S. weather situation turned sharply better as the Southern Plains received moisture and fears of a freeze diminished. News of increased trade restrictions in major exporters did not provide much support as old crop demand has greatly diminished, evidenced by a light sales report. Markets did not react strongly to news of an upcoming release of approximately 250,000 MT of wheat by the U.S. government for food aid purposes, but prices may come under pressure when the exact class breakdown of sales is known next week. For the week, May delivery futures at the CBOT were down 27 cents/bu, the KCBOT fell 14 cents and the MGE was 62 cents/bu lower. Corn nearbys gained 15 cents/bu while soybeans were 29 cents/bu higher.
  • U.S. export sales of old crop supplies fell to 129,200 MT last week, leaving exportable supplies at 596,000 MT with 7 weeks left in the marketing year. Another 179,200 MT of new crop supplies were booked, taking total sales for 2008/09 to 3.2 MMT, nearly 4.5 times greater than last year.
  • Export restrictions from Kazakhstan were announced this week. Wheat exports, but not flour, will be banned from next Friday until September. Argentina extended its export closure to May 5 as negotiations between the government and farm organizations continue to be tense, increasing the threat of renewed strikes.
  • A Canadian planting intentions survey will be released next week by Statistics Canada. A Reuters survey of traders this week indicates a 12% wheat acreage increase is anticipated in Monday's report, a 300,000 hectare increase, with durum gaining 16%. The results of the trader survey exceeded those of a government survey released by Canada's largest crop-producing province last week. Agriculture Saskatchewan expects total wheat acreage to increase by 7% with durum up 9% and spring wheat up 3%. The continuing delay in warm temperatures in the Northern Plains may also limit wheat acreage as shorter season crops such as oats and barley are often substituted when planting is delayed.
  • Crop progress reports this week showed 8% of U.S. HRS has been planted, compared to the 5-year average of 12%. Conditions in western North Dakota and eastern Montana remain very dry but a strong storm is forecast to bring heavy rains to the region this weekend with more precipitation expected later next week.
  • HRW basis premiums rose this week in Gulf ports on firmer old crop interest expressed by Brazil as well as U.S. domestic millers that continue to buy on a just-in-time basis. Demand from Iraq is also expected, but for new crop positions. The inverse into new crop remains extremely small as the demand outlook remains firm while lacking competition from international exporters for some time. On the other hand, new crop SRW is at a 76 cent/bu ($28/MT) discount to old crop, giving millers incentive to hold out for another month if possible.
  • The complete food aid inventory was opened for bids this week with a target 250,000 MT to be sold of the 915,000 MT catalog. The most significant class positions held in the Bill Emerson Humanitarian Trust are 620,000 MT of HRW and 269,000 MT of SW.
  • SW prices were tested once this week by Korea, but with stocks and trade volume extremely thin, export offer spreads exceeded $2/bu. The nominal price indicated on the report was reduced by 85 cents/bu to $11.75/bu ($432/MT).
  • Ocean freight rates rebounded strongly this week with rate estimates in both oceans increased by $3/MT.
  • Near term price direction will continue to focus on weather, old crop demand and trade restrictions in major exporters.

File Name
PR 080418.pdf
PR 080418.xlsx
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