Strong corn export demand
Wheat Fundamentals: Ukraine and Russia working on plans to further restrict grain exports. China announces it has enough grain to remain self-sufficient and unlikely to need noticeable imports. The Sec of Ag for Argentina estimates the wheat crop at 15.4 million tonnes, unchanged vs the prefreeze period in Nov. USDA estimates the crop at a steady 15 million tonnes.
Argentina trade had suggested at much as 1.2 million tonnes of wheat was destroyed by the Nov. preharvest freeze. Weekly export sales for the week ending Dec 13 of 7.5 mil bushels compare to a five-week avg of 13.6 mil bu. Sales through the first 29 weeks of the marketing year are running 83% higher than yr earlier levels and are 65% higher than the five year ave. Actual shipments are running 77% above year earlier levels and 70% above the five year ave. Actual sales of 1.06 billion bushels are 90% of the projected export target of 1.175 billion bushels. Of the remaining 22 weeks of the marketing year, weekly sales need to ave 5 million bushels per week. Bullish news is Egypt snapping a tender for 55,000 to 60,000 tonnes of wheat from world suppliers, S Korea reducing its import tax on grains and oilseeds to get a handle on food inflation and bearish to wheat futures is the real possibility for Argentina to resume wheat exports. Look for Argentina to resume export sales but Allendale suggest the resumption may not last long before export quotas are reissued and ultimately support world wheat futures. India cancels its tender to buy 550,000 tonnes of wheat citing high prices and poor availability on Tuesday and have not retendered.
Old Crop Marketing: your old crop wheat is hedged in the March futures. The present spread between the Mar-May suggest to sell before March futures expiration. Those not hedged in futures, there are major cash markets which provide as much as 15 cents to carry the crop until the March time frame and then the old crop value drops $1.72 per bushel from April to July delivery.
New Crop: July 2008 CBOT futures establish a new life of contract high on Thursday 12/13/07 of 8330. The trend is turning from up to sideways. Spring wheat still battles corn and beans for 2008 spring planting market share. The world is responding with increased acres but until snow cover comes off winter plantings in the spring of 2008 there remains a great deal of uncertainty of producing sufficient supplies for pent up and higher trending long term demand. We see no reason to hedge new crop above the 65% level we have on for now. 7630 could be a bull to bear momentum price which could prompt new additional hedges.
Trade Posture: Allendale remains bullish technically and fundamentally to old crop futures. Declining stocks, continued increased domestic and export demand in the face of rising prices, and no guarantee of major world suppliers able to notably build 2008 world stocks. The US winter wheat conditions are the third weakest dating back to 1989. Allendale's research suggest conditions are not expected to improve noticeably during the summer 2008 harvest. Tight world stocks of corn and rice is viewed as supportive to the other starch crop of wheat.