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February 22, 2008

(See attached file: PR 080222.xlsx)(See attached file: PR 080222.pdf)

Highlights
  • U.S. futures markets were volatile again this week with prices ending higher in most positions. The Minneapolis March continued to gyrate in thin trade, closing down $1.20/bu after the first two sessions and gaining back $1.10/bu in the last two. Bearish fundamentals, including an export sales report showing large cancellations, beneficial weather in the Southern Plains and an optimistic acreage report from the USDA Outlook Forum, weighed against reports of strong global demand for old crop positions, negative crop conditions in Texas and continued risk to export supplies as governments of major exporters intervene to protect domestic prices. For the week, nearbys at the CBOT were up 22 cents/bu, the KCBOT rose 25 cents while the MGE March position ended down 10 cents/bu. For new crop positions, July delivery in Chicago and Kansas were up 49 and 50 cents respectively and Minneapolis was up 58 cents in the September position.
  • Export sales this week netted 101,000 MT as new sales outweighed a hefty 241,000 MT of cancellations. The net level is near the 90,000 needed over the next 15 weeks to reach the USDA forecast. With donations included, sales only need to average 60,000 MT/weekly. Total commitments of the 2008/09 crop are nearly 2 MMT with another 137,500 MT booked this week. Turkey and Iraq both have tenders scheduled for this weekend.
  • The USDA baseline projections released at the annual Outlook Forum today indicate a 13% (800,000 hectare) increase in U.S. spring wheat acres this year, well above any private estimate. Total all-class U.S. production is forecast to increase by 7 MMT (12%) to 63.4 MMT, allowing 2008/09 ending stocks to nearly double from this year.
  • Government intervention in exports this week included Russia cutting off wheat exports to neighboring Belarus and Kazakhstan to assure exporters do not circumvent the 40% export tax while Argentina delayed the opening of its export registry until March 17.
  • Basis prices for HRS in the Gulf fell back 50 cents/bu to $5.25/bu for nearby positions, with trade reportedly very thin. Increasing U.S. mill demand pushed up HRW basis prices in both the Gulf and PNW. SW prices at the PNW remain unchanged for the second week.
  • Ocean freight rates stabilized this week after gaining $15/MT in just two weeks. The Baltic Panamax Index fell 9% but physical fixtures appear to lag the losses on paper, taking $2/MT off Pacific rates while the Atlantic is up $1/MT.

File Name
PR 080222.xlsx
PR 080222.pdf
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