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June 15, 2007
(See attached file: PR070615.pdf)(See attached file: PR070615.xls)

Highlights:
  • Wheat futures soared all week through yesterday's close with the most significant price action since last September, complete with a session at the KCBOT locked limit-up. Fundamentals certainly support, focused largely on hot and dry conditions in the Black Sea region and persistent rains in the U.S. Plains, but the run-up this week is credited to the speculative funds. The commercials believe they had adequately priced in the inclement weather in the move up over the last three weeks. For the week, CBOT July futures shot up 79 cents/bu, the KCBT was up 78 cents/bu and the MGE rose 54 cents/bu. Corn futures rose 37 cents/bu from last week. HRW is $1.30/bu (28%) higher than four weeks ago.
  • The WASDE sparked this week's fireworks on Monday with USDA revising down its forecast for the Black Sea harvest by 7 MMT. The Ukrainian Agriculture Ministry came out the same day forecasting a 12 MMT crop, down from 14 MMT last year and 2 MMT lower than the USDA estimate. Excessive heat is hurting the Russian winter wheat crop and they likely planted less spring wheat - following the example set by Canada, Kazakhstan and the U.S. - as returns to other crops are better than wheat. Spring wheat accounts for more than 60% of Russian production.
  • The CWB released a statement today saying that Canadian farmers planted the smallest spring wheat crop since 1970. The acreage shift to more profitable crops was compounded by wet spring conditions, forcing acreage into shorter season crops like barley.
  • In its crop production report, also released Monday, NASS revised its U.S. winter wheat production estimate down slightly. The estimate of a 51% increase in HRW production was through June 1, leaving unaccounted nearly two weeks of constant rain on ripe wheat. Nonetheless, traders feel it is simply too early to assess how the rain will affect quality and yield.
  • HRS basis moved down this week but high priced laker freight is keeping a lid on export business. With the crop moving into the flowering stage, wet conditions put the crop in danger of fungal disease. Unfortunately, .25 - .5 inches of rain is forecast through the weekend.
  • European prices moved up along with U.S. exchanges this week. The FAS grain report on EU stock levels shows that the European Commission liquidated intervention stocks last year, leaving EU prices open to more volatile action.
  • SRW basis fell 23 cents/bu ($8/MT) in the nearby but moved up in the deferred months, strengthening an already hefty carry. Basis offers among traders vary by 20 cents/bu in July.
  • PNW basis levels collapsed with the board run-up. SW prices only rose 10 cents/bu, taking the SW premium over SRW down to $9/MT (24 cents/bu) from $25/MT last week.
  • SRW futures are still trading at a 10 cent premium to HRW (July delivery) although HRW is at a 65 cent/bu FOB premium. HRW futures at a $1.77/bu ($65/MT) premium to corn, up from $1.46/bu ($54/MT) last week.
  • Ocean freight rates fell this week with rate estimates in the Atlantic down by $6/MT and the Pacific down by $2/MT. Unfortunately, freight out of the Great Lakes remains strong.

Links
USDA World Agricultural Supply and Demand Estimates:
http://www.usda.gov/oce/commodity/wasde/latest.pdf

NASS Crop Production Report:
http://usda.mannlib.cornell.edu/usda/current/CropProd/CropProd-06-11-2007.pdf

FAS Grain World Markets and Trade:
http://www.fas.usda.gov/grain/circular/2007/06-07/graintoc.htm

File Name
PR070615.pdf
PR070615.xls
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