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January 4, 2008

(See attached file: PR 080104.pdf)(See attached file: PR 080104.xlsx)

Highlights
  • The new calendar year brought two limit-up trading sessions and ended nearly limit-down today as increased fund money has brought a new degree of volatility to wheat markets. Fund capital flowed into a broad spectrum of commodities with gold and crude oil hitting all time highs as stock markets fell on fears surrounding the U.S. economy. Government intervention in trade remains a bullish influence while strong global import interest also adds support. For the week SRW nearbys at the CBOT were up 47 cents/bu, the KCBOT rose 32 cents and the MGE finished up 53. Corn gained 15 cents/bu this week and soybeans were up 41 cents.
  • Pakistan tendered for 610,000 MT this week with nearly half specified as soft white wheat from the U.S., Canada or Australia. Bangladesh tendered for 50,000 MT and Egypt booked nearly that much. Today's anemic sales report was not surprising for the holiday week. The 123,000 MT all class sales total equals the average needed for the next 22 weeks to meet the USDA export forecast.
  • This week, China imposed export quota restrictions and a tax on flour exports following the decision last month to end subsidies on grain and oilseed exports. India abolished its 36% duty on flour imports and the Argentine export registry remains closed.
  • Traders are cautiously optimistic that the U.S. will win at least some of the Pakistani business. SW offers were unchanged for the week at $13.45/bu ($494/MT). Strong storms in the PNW are slowing cargo loading but providing good moisture to much of the growing region.
  • Tight old crop HRS supplies increased the spread over new crop prices this week with September '08 delivery HRS (MU08) at a $1.96/bu discount to nearbys, over double the 99 cents/bu old crop premium in November. The MU08 premium over December '08 corn rose 32 cents this week to $4.00/bu, as the market shows increased concern for HRS acres. The November '08 soybean premium over MU08 contracts fell 5 cents/bu this week to $2.74/bu. The SW premium to SRW fell $14/MT this week on the gains in futures prices to $3.75/bu ($137/MT).
  • Ocean freight rates saw a sharp break this week with the Baltic Dry Index falling to a 3 month low on slack demand during the holiday season. Pacific rates are off 40% from late October highs though still 60% higher than January 2007. Rates in the Atlantic are down 17% from October and 90% higher than last January.
  • The dollar continued to fall against the euro and other currencies this week on negative U.S. manufacturing and jobs data increasing the probability of another interest rate cut by the Federal Reserve this month. The euro is at $1.48 while the Canadian dollar is trading above the U.S. dollar.
  • Next Friday, January 11, USDA will release several important reports including estimates of grain stocks held in the country, U.S. winter wheat seedings, the monthly World Agricultural Supply and Demand Estimates, as well as a final crop production assessment.

File Name
PR 080104.pdf
PR 080104.xlsx
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