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October 19, 2007

(See attached file: PR071019.pdf)(See attached file: PR071019.xls)
  • Oil had the attention of commodity markets for much of the week as U.S. crude breached a record $90/barrel. Wheat markets lacked fresh fundamental news, leaving futures open to a technical sell-off through the first half of the week. The CBOT finished Wednesday's session down $1.41/bu from its high on September 28. Another strong export sales report Thursday led to a bounce while rumors of Russia increasing its export tariff markets limit up today. From last Friday, CBOT December futures are down 2 cents/bu, the KCBT is up 1 cent/bu while the MGE was unchanged. Corn futures rose 19 cents/bu this week.
  • Just short of 1 MMT for the second week in a row, U.S. export sales are now 83% of the total year forecast with 7.5 months remaining in the marketing year. Total commitments for 2008/09 are at 733,800 MT, compared to 45,000 MT last year. While some traders report quieter export interest, others are seeing continued strong demand.
  • Export basis offers are near historically high levels after jumping last week. SRW basis prices are currently 79 cents/bu, up from option (0 cents) earlier this summer. The premium for higher (12%) protein HRW rose again this week at the Gulf on very short supplies. Flat priced SW dropped 25 cents this week, diving with the CBOT earlier in the week but not rebounding as strongly today.
  • This week, the Russian economy ministry suggested an increase in its wheat export tariff from 10% currently to 30% of export value, while not less than $31/MT. The tariff will precede the sale of grain from government intervention stocks to bring down domestic prices.
  • In testimony to Congress USDA Chief Economist Keith Collins said he expects wheat acreage for the 2008/09 marketing year to rise 6% over last year to 26 million hectares. That would be a 12% increase over 23.2 mha planted in 2004/05. Reports suggest a large increase in SRW seedings on double cropping and good planting weather, stronger SW plantings shifting from HRW in the PNW, stable to increased HRW and durum acreage and a decline in HRS acreage as barley, pulses and hay prices remain strong. Collins forecasts a 10% increase in soybean acreage to 28 mha (down 7% from 2004/05) and a 7% decline in corn acreage (up 11% from 2004/05).
  • Winter wheat planting progress, at 73%, has nearly caught up to the 76% average. Weather is generally beneficial with planting conditions in the northern SRW belt (particularly Ohio) much better than last year's wet fall and Montana has received some needed moisture. Strong storms and excessive moisture may necessitate reseeding in pockets of the Southern Plains. Seed availability continues to be a concern.
  • The SRW/corn price spread at the CBOT narrowed again this week with December SRW now at a $4.85 premium to corn. The SW premium to SRW fell on today's futures move to $1.06 cents/bu ($39/MT). New crop futures continue to gain on nearbys. December delivery SRW is at a $1.63 premium over July, down from $2.59 a month ago, increasing incentive for higher plantings.
  • The U.S. dollar continued down this week with the euro up to $1.43 and the Canadian dollar worth nearly $1.03 U.S.
  • Ocean freight remains at record levels with the PNW - Japan rate estimated at $95/MT and Gulf - Nigeria at $100/MT. Rates historically top out this time of year, so perhaps December and January will bring some relief.
  • Movement of metal, coke, and construction materials have all been substantially lower than last year, freeing rail capacity for grain and depressing barge rates. Unfortunately, a decrease in shipments of these materials has led to a decrease in inbound freight into the Great Lakes, driving up rates for Lakers vessels.

USW Commercial Sales Report:

NASS Crop Progress Report:

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