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September 14, 2007

(See attached file: PR070914.pdf)(See attached file: PR070914.xls)

  • Futures movement this week marked the first break in bull sentiment in over a month. The mid-week WASDE report set up a textbook "buy the rumor, sell the fact" swing as markets were near limit-up in both Monday and Tuesday sessions, followed by limit-downs Wednesday and Thursday when USDA confirmed a very tight global supply situation and released an enormous export sales report. Profit taking and "unwinding" of the record corn-wheat price spread in Chicago were reported while U.S. markets continue to follow European prices. From last Friday, CBOT December futures were up 3 cents/bu, the KCBT was up 22 cents/bu and the MGE rose 21 cents/bu. Corn futures were up 2 cents/bu this week.
  • Even 2.1 MMT of export sales, the highest sales week since June 1996 and the third highest since reporting began in 1979, did not keep markets from falling further on Thursday. U.S. sales have exceeded 1 MMT for 7 of the past 10 weeks. A premium at the CBOT over the other exchanges shifted demand to HRW and HRS while SW picked up an Egyptian sale. SRW sales accounted for 4% of total sales last week after averaging 20% this year.
  • After jumping an incredible $17/MT in the Pacific and $5/MT in the Atlantic last week, ocean freight is impacting import interest. There is some dispute over whether rates are being driven up by freight derivative markets (investment speculators) or capacity supply and demand. Rates in the Pacific continued up this week, notching a more modest $1/MT while the Atlantic came down $1/MT. The Pacific/Atlantic spread on the bellwether Japan routes fell to $11/MT this week from $29/MT just 3 weeks ago, giving advantage to the Gulf export program. The spread averaged $15/MT last marketing year. Rates out of the Lakes are now firmly into 3 digits with Duluth - Casablanca at $123/MT.
  • The corn/SRW price spread at the CBOT fell off record levels. September delivery SRW is at a $4.97 premium to corn, down 15 cents/bu from last week but well above the 53 cent/bu nearby premium just 6 months ago. Higher basis offers for SRW on tighter capacity in the center Gulf compared to Texas negated the HRW futures gain over SRW this week. The HRW FOB premium to SRW narrowed to 19 cents/bu ($17/MT).
  • Consistent SW demand, particularly from North Asia, along with tight supplies pushed it to a 4 cent/bu ($12/MT) premium over SRW this week.
  • Midwest Barge rates fell, particularly on the southern Mississippi with rates off 37% ($15/MT) from Memphis to NOLA. A major barge line increased demurrage rates.
  • The U.S. dollar marked record 15-year lows against a broad range of currencies as concerns over a U.S. economic slowdown continued to weigh, increasing the prospect of monetary easing by the Federal Reserve.
  • Near term price direction will be continue to be guided by European prices, precipitation in the Southern Hemisphere and export demand.

USDA World Agricultural Supply and Demand Estimates (WASDE) report:

USW Commercial Sales Report:

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