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March 14, 2008

(See attached file: PR080314.xlsx)(See attached file: PR080314.pdf)

  • U.S. futures markets rallied through Wednesday on prospects for increased export demand and USDA estimates of a tighter balance sheet. Fund positioning was also cited, including unwinding a long corn/short wheat CBOT spread that put SRW prices well above international competitor classes. Fund profit taking was credited with a sell-off in the last two sessions, helped lower today by an optimistic new crop forecast from Informa Economics. For the week, March delivery prices at the CBOT were up 68 cents/bu, the KCBOT rose 72 cents while the MGE gained $1.30/bu. Corn nearbys were up 12 cents/bu while soybeans fell 1 cent/bu.
  • New crop prices followed old crop this week as the CBOT July position gained 94 cents/bu and the KCBOT rose 92 cents. The September position in Minneapolis gained 88 cents/bu. December corn was up 16 cents/bu and November soybeans lost 33 cents/bu.
  • Commodity index fund capitalization reportedly ended 2006 near $110 billion. By the end of 2007 index funds grew to $155 billion and as of the end of February 2008 the total has reached about $185 billion.
  • U.S. HRW conditions were generally stable this week as much of the region received beneficial precipitation, including snow cover, and more is forecast. Traders are optimistic that the crop in Kansas and Oklahoma can bounce back on favorable weather while conditions in Texas and Colorado are causing increasing concern. Much of the crop remains dormant although the Southern Plains received unusually high temperatures this week.
  • Export sales continue above levels needed to achieve the USDA export forecast. Net sales of old crop supplies at 201,100 MT leave 1.1 MMT to sell over the next 12 weeks. Cancellations did not factor as heavily as expected, although a 100,000 MT cancellation to Algeria will go on next week's report. Demand for new crop supplies remains robust with 213,100 MT booked this week, putting total commitments above 2.2 MMT.
  • International demand for old crop supplies continues with tenders from Turkey for 500,000 MT, half of it specified as U.S. HRW, and Iraq as well as significant donations. Tenders from Jordan and Morocco are expected to be sourced from Europe or Kazakhstan and Bangladesh has tendered for 50,000 MT.
  • In its World Agricultural Supply and Demand Estimates revision this week, USDA raised its estimate for U.S. exports by 680,000 MT to the highest level in 12 years. The estimate of U.S. domestic use was also increased as early-season discounts for HRS spurred mill demand. Ending stocks were revised down 820,000 MT to the lowest level since 1948.
  • Optimistic crop outlooks based on higher plantings and favorable weather were released this week for the European Union and the Ukraine.
  • HRS basis prices continued to fall this week, dropping another $1.00/bu in all ports, as demand has fallen off. Some switching to HRW has been reported.
  • SW offers remained unchanged this week as thin trade leaves values untested. Nearby delivery is offered at $12.50/bu.
  • Ocean freight rates remained stable this week after gaining 24% in the past month. Rates are still 10% below their late October peak but 74% above March 2007. Like commodity funds, open interest in the freight futures market has taken off with trade in 2007 totaling $117 billion, up from $55 billion in 2006.
  • The dollar exchange rate continues to fall, setting a new record $1.565 against the euro and hitting a 12-year low against the yen today.

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