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January 26, 2007
(See attached file: PR070126.pdf)(See attached file: PR070126.xls)

Highlights
Markets were on a roller coaster this week, rising Tuesday in anticipation of a State of the Union Address bullish for corn-based ethanol, falling Wednesday when Bush's speech seemed to support alternative (cellulosic) technologies, saying: "We must continue investing in new methods of producing ethanol...," then rising again Thursday as feed mills bought in the dip in corn prices. Wheat is following corn, bidding for acreage and (trying to) stay out of the feed mills. Net change from last week: CBOT SRW futures down 4 cents/bushel, the KCBOT down 1 cents and the MGE down 5.

Bear spread positions - short nearby, long deferreds - are slowly coming back to the market after being decimated last fall. The July wheat/corn spreads are being watched closely because, at some point, it could be profitable for farmers to plow under their winter wheat to plant corn.

Optimism from a 195,000 MT HRW sale to Nigeria, a Moroccan tender for 85,000 MT U.S. origin durum and 55,000 MT of SRW to Egypt this week was countered by yet another low export sales total reported for last week. Sales of 246,100 MT were a sharp drop from 824,700 MT sold the previous week.

Use of wheat as livestock feed continues to be a hot topic with reports of large purchases of new crop wheat by domestic feed mills concerned about sourcing corn this summer.

Basis prices unchanged from last week. Traders reporting lackluster sales activity.

The HRW premium to SRW rose slightly to 80 cents/bu ($29/MT).

SW has maintained a premium to SRW for a month on firm SW prices. In October SRW was selling at a 61 cent/bu ($22/MT) premium to SW. Currently SW is 26 cents ($9/MT) more expensive than SRW. In the tender last weekend, Egypt purchased another Panamax of SRW from the U.S. Mid-Atlantic, the sixth shipment from the Norfolk, Virginia port this marketing year.

Barge rates came down this week after jumping by as much as 58% last week. Rates on the Ohio were down slightly while routes on the Illinois and lower Mississippi fell between 22 and 27%. At $14/MT, rates from St. Louis to NOLA are 24% below this week last year. Volatile rates through the near term are expected on fluctuating upbound shipments. Upbound steel and cement shipments have leveled off, but upbound fertilizer shipments may rise to meet the demand of a predicted increase in corn plantings next spring. Rail and truck rates were largely unchanged from last week.

Ocean freight rates were unchanged in the Pacific while the Atlantic came down $2/MT. Rates in the Atlantic basin are now 41% higher than year-ago levels and the Pacific is up 54%.

State of the Union Address 2007:
http://www.whitehouse.gov/news/releases/2007/01/20070123-2.html

USW Commercial Sales Report:
http://www.uswheat.org/commercialSales/doc/D541F3395903C4FE8525726E004D96D2?OpenDocument#

File Name
PR070126.pdf
PR070126.xls
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