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March 28, 2008


Highlights
  • Market volatility has become standard with daily swings of 30-50 cents/bushel typical as markets continue to find price discovery difficult on short supplies and thin trade. Futures prices strengthened Monday and Tuesday on a technical rebound from last week's commodity sell-off with soybeans leading on the problematic Argentine export situation. Renewed fund liquidation, profit taking and position squaring for the end of the month and quarter as well as Monday's planting intentions report were all credited with steep declines in the last 3 sessions of the week. For the week, wheat futures ended close to where they started with May delivery prices at the CBOT up 3 cents/bu, the KCBOT fell 10 cents and the MGE was off 23 cents/bu. Corn nearbys were up 54 cents/bu on expectations of a large fall in plantings in Monday's report and soybeans rose 63 cents/bu.
  • Old crop sales robust. The sales report this week showed old crop bookings at 379,900 MT with Yemen taking 82,000 MT of SW and Nigeria buying 126,500 MT of HRW. Egypt bought 415,000 MT of SRW since last Thursday. SRW sales currently exceed the USDA forecast by 114,000 MT and with approximately 295,000 MT of Egyptian SRW sales not yet accounted for, SRW exports are approximately 475,000 MT oversold. This week's sales pace was 5.6 times greater than necessary to meet the USDA estimate of remaining exportable supplies of 700,000 MT over the next 10 weeks. Sales cancellations were notably absent from this week's report. New crop sales continue to climb with 183,000 MT booked this week, taking the total to 2.6 MMT.
  • Traders expect an upcoming sales lull as purchases by Iraq have not materialized and buyers appear covered and able to wait for new crop winter wheat supplies. SRW supplies are due to arrive in export positions in approximately 50 days and HRW nearly a month later. HRW cash prices in deferred positions are currently trading at nearly the same level as old crop based on a futures price carry, that advanced substantially this week in both Kansas and Chicago, and the expectation of increased import demand into new crop months as U.S. supplies lack global competition immediately following harvest. The extremely tight old crop HRS balance sheet has kept prices of that class inverted.
  • Turkey canceled its tender for 250,000 MT of U.S. wheat this week, citing technical reasons. A grain board official stated yesterday that importers are unable to source financing in the U.S. and will explore other origins. Although GSM-102 funds for Turkey were expanded by $65 million this week, adding to $165 million already used, the additional funding was reportedly used for corn and soybean purchases.
  • Argentina's farmer protest that began over 2 weeks ago has essentially halted grain and oilseed trade. Producers promised to continue roadblocks and withhold products from the market until the government ends the new export tax regime which includes substantially higher levies on oilseeds. This situation is an important wildcard for U.S. old crop wheat demand as Brazil, the second largest importer in the world, will likely turn to North American supplies should Argentine exports remain unavailable.
  • Black Sea export restrictions were extended this week with Russia delaying the end of its 40% export duty on wheat to July 1 and the Ukraine extending its grain export quota, also to July, while adding only 3,000 MT to the wheat quota.
  • Global production to rebound in 2008/09. UkrAgroConsult pegs Ukrainian wheat production at 18.4 MMT, up from 13.9 MMT this year and a 10 year average of 15.3 MMT. The Kazakh Deputy Agriculture Minister said that wheat sowing is planned at 13.5 million hectares, the highest level in 10 years. Egyptian Agriculture Minister also reported the highest seeded area in a decade in the world's largest importer, with production forecast at 8 MMT from 7.4 MMT in 2007/08. Australian production forecasts range from 26-27 MMT compared to the 13 MMT harvest in 2007/08 and 11 MMT the year before, as good rains ahead of planting provide optimism. European consultancy Coceral estimates production in the EU-27 up 15%.
  • New crop weather concerns increased this week in the U.S. While, on average, HRW conditions continue to show improvement, southwestern Kansas and the panhandles of Texas and Oklahoma are deteriorating on lack of precipitation. The rains are skipping the southern Plains, moving east and flooding the southern Midwest, causing problems for the SRW belt. Although the Dakotas received snow this week, drought is reportedly spreading in the Canadian Prairies, putting the CWRS region at risk. Chinese officials reported that the northern part of its wheat belt has been hit by the worst drought in 5 years, adding that domestic reserves would deter the need for imports.
  • Ocean freight rates continue to soften. The dollar remains near historic lows against the euro at $1.58/euro while the Canadian dollar continues to trade around parity with its U.S. counterpart.
  • The USDA planting intentions report will be released Monday morning. A Reuters poll of analysts this week indicates average expectations of a 6.5% increase in HRS acreage and a 14% increase in durum acreage.

(See attached file: PR 080328.xlsx)(See attached file: PR 080328.pdf)

File Name
PR 080328.xlsx
PR 080328.pdf
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