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July 3, 2008

(See attached file: PR 080703.xlsx)(See attached file: PR 080703.pdf)

Highlights
  • Futures fell on harvest pressure and a USDA survey that showed corn acreage well above expectations reducing spillover support. Global and U.S. crop potential continues to improve both in quantity and quality. Optimism is burgeoning in HRW country with expanded protein availability eroding support in Minneapolis. HRS nearby export prices dove this week as exporters switched offers to the steeply inverted September delivery month, shaving $1.50/bu off prices in addition to the futures and basis declines. For the week, September delivery positions at the CBOT fell 25 cents/bu, the KCBOT was off 33 cents/bu and the MGE fell 64 cents/bu. Corn July positions were down 9 cents/bu while soybeans gained 77 cents/bu.
  • Export sales remain robust with 668,100 MT booked last week. HRW accounted for the bulk of the sales as demand from traditional buyers Nigeria, Mexico and Japan remains consistent and a 280,000 slug sold to an unknown destination pushed the total above expectations. The HRS export program continues to be focused in Asia as European buyers are content to wait and see how their harvest fares. Japan took 105,400 of HRS last week and bought another 59,000 MT this morning, covering needs into October. SRW sales were surprisingly strong with over 100,000 MT booked by private traders in Egypt and Mexico.
  • U.S. supplies untapped in large tenders this week by Egypt's GASC and Pakistan as high freight rates put landed prices above competitors. Offers of SRW in the Egyptian tender were $30/MT above Black Sea supplies and $20/MT above Canadian Eastern SRW.
  • SW prices continued to erode this week on improved PNW weather. With the exception of a small region in central Washington, yield potential in the PNW is higher than average. Rains in Australia, along with 96,000 MT of ASW sold to Japan today, improved the supply outlook, pushing new crop SW positions down another 25 cents/bu ($9/MT) from last week. Export interest is already out to September, making the $1.05/bu ($39/MT) fall in old crop prices academic.
  • Argentine situation greatly improved with the export registry remaining open for a second week and producers reportedly appeased by a government reform of soybean export taxes. Rains helped producers get the wheat crop planted and more need precipitation is in the forecast, although the Buenos Aires Grains Exchange estimates wheat acreage will fall 10% on dry conditions and reaction to the political turmoil. Rumors of the resumption of Argentine exports leading to cancellations of North American supplies remain unsubstantiated.
  • Ocean freight backed off this week as demand softened, perhaps as a result of the run-up last week. Rate indications in the Atlantic are down $5/MT and the Pacific is off $7/MT.
  • Fresh input lacks next week until Friday's release of the USDA World Agricultural Supply and Demand Estimates, which include the first by-class forecast for 2008/09. Again, wheat will likely find direction from corn fundamentals.

File Name
PR 080703.xlsx
PR 080703.pdf
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