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December 15, 2006

(See attached file: PR061215.pdf)(See attached file: PR061215.xls)
Futures prices bounced yesterday on the Informa U.S. winter wheat planted area forecast: 10% above last year but down from their November estimates. Apparently the wet conditions in the eastern U.S. deterred some SRW seeding. USDA will release its winter crops area forecast on January 12. Markets are also eyeing the corn/wheat spread, set to bring a fall in North American spring wheat acres. Futures up in all exchanges from last week. CBOT March delivery futures were up 9 cents/bu. The KCBOT was up 3 cents and the MGE up 12.

While conditions in U.S. winter wheat areas remain dry, forecasts call for precipitation next week. Weather problems are lingering in the EU, China, Brazil and Australia.

Basis premiums in Gulf ports are generally unchanged.

Interior demand driving durum prices. The price range revised up 19 cents a bushel with the Gulf program nominally trading at $6.67 to $7.35/bushel ($245 to $270/MT).

HRW premium to SRW has fallen to 45 cents/bu ($16/MT) from 78 cents just two weeks ago. At 38 cents/bu ($14/MT), SRW nearby cash premium to SW generally unchanged. Strong freight rates out of the Pacific continuing to limit SW competitiveness, although SW and SRW each took a shipment in the Egyptian tender last weekend.

HRW basis premiums out of PNW ports strengthened considerably this week (10 cents/bushel) as exporters fill the Iraqi shipments on top of the important, "routine" Asian markets.

Barge rates crashed this week, corn and beans benefitting more than wheat as SRW movement is minimal. The Egyptian SRW tender last weekend was won by Perdue out of their East Coast (Chesapeake, Virginia) port. Barge rates down on the winter closure of the upper Mississippi decreasing river mileage, increasing vessel capacity. Also seeing some decline in (import) movement of non-agricultural commodities such as cement and steel. Rail rates in the secondary market have strengthened to trade at parity with the tariff rate. The tariff rail rate for Kansas City - Galveston (HRW) at $23/MT up 5% from last year, Minneapolis - Houston (HRS) at $33/MT is 25% higher than last year, Minneapolis - Portland at $42/MT is even with last year.

The ocean freight rate spread between the PNW and Gulf declined by $3/MT this week as strength in the Pacific has succeeded in drawing more vessels out of the Atlantic. Handy size vessels led the Atlantic basin up as exporters needing nearby fixtures are having difficulty finding cover. Gulf - Japan at $52/MT, up $10/MT (39%) from last year. PNW - Japan at $41/MT, up $16/MT (39%) from December 2005. The last vessels origin Duluth are now being loaded after which the Lakes will be closed for the winter.

The dollar rebounded in the second half of the week on strong sales and jobs data. Low inflation numbers today will cap the dollar's gain. The dollar is holding near 14 year lows against the British pound ($1.95) and 20 month lows against the euro ($1.31). The dollar weakness is positive for price competitiveness of U.S. exports.

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