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August 22, 2008

(See attached file: PR 080822.pdf)(See attached file: PR 080822.xlsx)

Highlights
  • Wheat futures continued to rally this week as bullish technical action, stronger crude oil and a weaker U.S. dollar added to dry weather concerns in Argentina, Australia and the U.S. cornbelt as well as export sales that continue to outstrip USDA estimates. For the week, the September delivery position at the CBOT was up 41 cents/bu, the KCBOT rose 37 cents/bu and the MGE was up 25 cents/bu. Corn finished 57 cents/bu higher, soybeans gained $1.10/bu while crude oil was up $4.39/barrel.
  • Sales hit a marketing year high last week with an Iranian purchase of 786,900 MT making up the majority of the 916,500 MT total. Traders are pessimistic on the demand outlook as import interest has fallen off with the runup in futures prices over the past two weeks.
  • Canadian harvest up 5 MMT: According to the Statistics Canada estimate released this morning, the country's production is forecast at 25.4 MMT from 20.1 MMT last year. A cooler than average spring has delayed crop development, increasing the risk of yield loss from an early frost. Recent warm temperatures have sped development, leading to optimism that crops will be harvested before the first hard frost hits. Argentine political standoff heated up this week with farmer groups staging roadside protests and threatening to resume strikes and roadblocks if export taxes are not reduced for smaller producers. The Argentine government approved another 1.4 MMT of exports yesterday, having limited international sales last year in order to control domestic price inflation. The government reported that area currently being sown for the 2008/09 will be the smallest in 16 years as continuing dry conditions exacerbate problems caused by the political turmoil.
  • SW protein premiums doubled this week as initial harvest results brought levels well above average while rains this week delayed cutting of typically lower protein areas, causing some quality concerns. The premium for a 9.5% maximum protein guarantee shot to 95 cents/bu this week while the 8.5% protein specification adds $2/bu to offers for unspecified protein.
  • SRW premium over corn fell this week with the CBOT September SRW futures now $2.79/bu over corn, down 16 cents from last week but up from $1.30/bu 2 months ago.
  • Freight rates softened this week with indications off $2/MT on Gulf routes and the Pacific down $1/MT.
  • Near term prices will likely continue to find direction from outside markets while export performance provides fundamental basis.

File Name
PR 080822.pdf
PR 080822.xlsx
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