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August 31, 2007
(See attached file: PR070831.pdf)(See attached file: PR070831.xls)

Note: We have added a table of indicative container rates to page 2 of the report.

  • Prices continue to move up at an astonishing rate, adding to the huge gains made last week. Markets are at record highs, searching for a price level where demand responds. Meanwhile, importers scramble to book coverage before prices jump again. Lacking any sign of price rationing, European and U.S. markets work in tandem to push prices higher. Negative production news was confirmed in Canada while anxiety builds over the Southern Hemisphere. For the week, CBOT December futures finished up 34 cents/bu ($1.04 in 2 weeks), the KCBT was up 33 cents/bu and the MGE rose 29 cents/bu. Corn futures fell 19 cents/bu.
  • U.S. export sales have exceeded 1 MMT for 6 of the past 8 weeks. Total sales are nearly double last year on winter wheat sales nearly 3 times higher than this week last year. HRS demand has room for growth, currently 33% higher than last year. HRS is priced at a 61 cent/bu ($22/MT) discount to SRW comparing Duluth and NOLA origination. SW sales are up 16% from last year as increased demand from South Asia compensates for Egypt's shift to SRW this year.
  • Durum prices are also ratcheting up on continued import demand and production concerns mounting in Canada and Australia. Lakes origin exports range from $9.53 to $9.80/bu ($350 to $360/MT).
  • High grain prices are expected to become increasingly political. Government meetings in Russia have been set for mid-September to discuss the possibility of export limits. The President of the Russian Grain Union told Reuters this morning, "We should meet on September 13 and a firm timetable will be set." Kazakhstan is reportedly introducing a new export licensing regime.
  • The HRS harvest is much further advanced than average as harvest weather has been ideal in the Northern Plains as well as the Pacific Northwest. Soil moisture in the Southern Plains HRW belt is sufficient for planting while clear weather will allow seeding. Excessively wet conditions in the Midwest could delay SRW planting.
  • PNW protein premiums narrowed significantly this week as harvest results indicate good availability of higher protein grain. The SRW premium to SW was cut 75% this week to 6 cents/bu ($2/MT) on stout SW export demand.
  • The corn/SRW price spread at the CBOT, already at a record level, continues to widen. December delivery SRW is at a $4.36 premium to corn, up 52 cents/bu this week.
  • Midwest Barge rates continued up this week, now at levels last seen following the 2005 hurricanes. Corn harvest has begun in the south, exacerbating already heavy wheat movement. At $36/MT, rates on the southern Mississippi are up 153% ($22/MT) from a month ago and more expensive than rates from Minneapolis, up only 31% ($8/MT).
  • Ocean shippers were optimistic when Monday's British holiday was followed by a fall in rates Tuesday on news that improved logistics in Australia would free up capacity. On Wednesday the ocean freight market shot back up and set a new record high, ignoring the improved port conditions in Newcastle that have decreased the number of waiting vessels by 38%. Rates in the Atlantic moved up $1/MT while the Pacific soared $5/MT.

U.S. Wheat Associates is the industry's market development organization working in 90 countries on behalf of America's wheat producers. The activities of U.S. Wheat Associates are made possible by producer checkoff dollars managed by 18 state wheat commissions and through cost-share funding provided by USDA's Foreign Agricultural Service.

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