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March 7, 2008

(See attached file: PR 080307.pdf)(See attached file: PR 080307.xlsx)

  • U.S. futures markets came under pressure from a slump in U.S. mill demand and signs that traditional buyers are cutting back on purchases. A raft of import tenders from the Middle East and Asia limited losses, but the global demand picture remains unclear. A blowout of speculative funds that rode the March Minneapolis up to $25/bu has taken $9 off that position in less than two weeks. General fund positioning in commodities factored this week as a gloomy speech by the Fed Chairman provided a pessimistic tone across markets. For the week, March delivery prices at the CBOT were up 20 cents/bu, the KCBOT fell 25 cents while the MGE fell $2.25/bu. Corn nearbys lost 12 cents/bu while soybeans were down $1.81/bu.
  • New crop prices for HRS managed to remain firm despite the rush to exit old crop positions. Australia's ABARE released an optimistic forecast for the 2008/09 harvest, predicting a near record 26 MMT, just over its initial projections for this year's 13 MMT disaster. Markets continue to show concern for the U.S. HRW crop on reports that conditions are below average and that Pakistan will need to import next year based on poor harvest potential. For new crop positions, July delivery in Chicago and Kansas were up 69 and 40 cents respectively while Minneapolis lost 8 cents in the September position.
  • Export sales this week would have nearly been negative if not for the 400,000 MT sale of HRW booked by Iraq. Net sales of old crop supplies at 431,900 MT leave 625,000 MT to sell over the next 13 weeks to meet the USDA export forecast. If food aid shipments are included, the U.S. is already oversold. Continued cancelations are expected through the remaining 13 weeks of the year, as is increased coverage for new crop positions. Another 73,000 MT was booked for 2008/09 this week, putting total commitments above 2 MMT, the highest level since 1982.
  • HRW conditions reports released this week showed Texas, the third largest HRW producing state, with 63% of the crop rated poor or very poor compared to 20% last year. Conditions in number two producer Oklahoma were said to have improved from last week, although worse than last year with 43% of the crop rated good or excellent versus 58% last year. In top HRW producer Kansas, 42% of the crop was rated good or excellent compared to 64% a year ago. Conditions in Nebraska and Colorado are better than last year.
  • Kazakh export limitations threatened by the agriculture minister last week appear to have been placed on hold. Kazak grain suppliers agreed to provide 1.2 MMT of wheat to domestic mills in return for leaving exports unrestricted, allowing exporters to honor contract commitments in the Middle East and North African and perhaps provide some additional sales.
  • HRS basis prices fell in the PNW and for Lakes open as import bids are sparse and domestic demand has subsided. However, traders are quoting offers in June and July basis May delivery futures rather than July, adding $1.25/bu to quoted offers.
  • SW offers tumbled this week on reduced import demand. Nearby delivery is offered at $12.50/bu, down $2.25 from last week.
  • Ocean freight rates have resumed their ascent, shooting up $10/MT on some Atlantic routes and $8 in the Pacific as the softening during the Chinese New Year, only a month ago, now seems a distant memory. The negotiations and supply chain issues that had been holding up iron ore trade have now been resolved and freight markets have returned focus to the insatiable demand of the Chinese steel industry.
  • The dollar exchange rate continues to plummet on grim economic data, falling to a new record $1.547 against the euro today.

File Name
PR 080307.pdf
PR 080307.xlsx
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