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September 28, 2007
(See attached file: PR070928.xls)(See attached file: PR070928.pdf)
  • Two USDA reports released today estimating U.S. production and stocks well below trade expectations sparked gains, particularly in soft white, after futures had soared all week on continued declines in Australian production potential and very strong import demand. Two weeks ago, markets quickly retreated after breaching $9/bu. Now prices seem comfortable above that level with the CBOT closing today at $9.39/bu, the KCBOT at $9.29/bu and the MGE at $9.06/bu. SW is trading at $10.75/bu. From last Friday, CBOT December futures are up 65 cents/bu, the KCBT is up 71 cents/bu and the MGE rose 80 cents/bu. Corn futures are down 4 cents/bu this week.
  • Today's USDA Small Grains Summary showed a 1.3 MMT reduction in the 2007 U.S. wheat harvest with all white production down 800,000 MT (11%) and durum down 145,000 MT (7%). HRW showed a small increase.
  • A 700,000 MT HRW sale to Iraq pushed last week's U.S. export sales above 1.5 MMT, the 9th of the past 12 weeks that exceeded 1 MMT. Large sales this week to Algeria announced under the USDA daily reporting system indicate another strong report is coming next week.
  • The drop in SW production spiked prices by $1.45/bu ($53/MT) this week. HRW and HRS basis in the PNW also strengthened as tight capacity in the Gulf is expected to push demand to Portland.
  • Optimism for global supplies based on the Kazakh Agriculture Ministry reporting a strong harvest and nearly ideal weather in Argentina was more than offset by continued drought in Australia. The International Grains Council forecast Australian production at 13.5 MMT, well under last week's ABARE estimate, based on continuing decline in conditions. The state of New South Wales cut its forecast by 44% to 2.3 MMT from ABARE's 4 MMT.
  • The European Commission ended set-aside requirements this week that obligated producers to leave 10% of their acreage fallow. Initial estimates are for 1.5 to 3 million hectares brought back into production for 2008/09, much of it wheat. USDA will reportedly make a decision on allowing production on CRP acreage next month, too late to affect wheat plantings. Nonetheless, estimates for increases in U.S. wheat acreage currently range from 3 to 5%.
  • Planting conditions are generally very good for U.S. winter wheat although, as of Monday, seeding progress was behind average due to wet fields in the Southern Plains states Kansas, Oklahoma and Texas.
  • The SRW/corn price spread at the CBOT jumped 69 cents/bu this week with December SRW now at a $5.66 premium to corn. The HRW FOB premium to SRW narrowed to 18 cents/bu ($7/MT). The SW premium to SRW is now 66 cents/bu ($24/MT) from near-parity for the previous three weeks.
  • The U.S. dollar continued down on speculation that negative economic data will drive further interest rate cuts in the U.S. The euro costs nearly $1.42 while the Canadian and U.S. dollars are virtually even.
  • Near term prices will find direction from indications that import demand is shifting to non-U.S. sources.

USDA Small Grains Summary:

USDA National Agricultural Statistics Service (NASS) Grain Stocks Report:

USW Commercial Sales Report:

International Grains Council Grain Market Report (Summary):

USDA NASS Crop Progress Report:

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