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Strong export sales

Agriculture.com Staff 07/30/2007 @ 9:47am

The talk of the trade this week was, no doubt, the huge export sales number reported on Thursday morning. At 2.1 MMT, it was double the trade estimate, which in itself was already quite large at 800- 1,000 TMT. This was the largest one-week's worth of sales since 1996, and trade talk already is suggesting there's another big sales number coming this week.

It was well documented that demand for US wheat had been on the rise, with several weeks of export sales consistently above trade estimates. But last week was a whopper and clearly shows that buyers are desperate for immediate needs and with European harvest problems, the buyers are coming aggressively for US supplies.

Following the export sales report all three wheat markets opened sharply higher, gapping above the June spike highs and touching limit up in the Sep Kansas City and Chicago contracts. Prices pulled off of those highs but still closed above those spike highs for most futures contracts, giving the bulls plenty of reason to think that there's more to this run.

But it's not just wheat needs, it's also feed grains. And again, Europe is the catalyst as feed supplies become extremely tight and they are looking around the world for imports. While they normally feed a great deal of wheat, they are also looking for anything non-GMO that can be used as a feed grain. That demand is drawing supplies from a variety of sources, and it is supporting US corn prices because our corn will be used to fill the void left by the exported non-GMO feed grains.

I don't know if the market can sustain the upward energy to test the all-time highs, particularly if the European harvest gets back on track. The spring wheat harvest will be the next significant event that could disrupt supply and the market will likely hang on until it is in the bin -both here in the US and in Canada.

Spring wheat harvest has begun in North Dakota, another year when the crop tour was estimating yields on some fields while other fields were already being cut. The crop tour projected average yields at 37.3 bu/acre, slightly above USDA's current projection, with total other spring wheat production estimated at 474.9 million bushels, compared to USDA's current projection of 497.

Despite the enormous stress the spring wheat crop has seen throughout virtually all of Montana, far western North Dakota and a great deal of the southwest Canadian prairies, it looks like the bulk of North Dakota will save the day with a very good crop that, for the most part, has had very few problems.

Obviously, the head and shoulders topping formations were negated and the market now looks to see if it can continue the momentum to those all-time highs. The bulls have a very strong technical argument that the next target is indeed those highs. The bears would argue that we've met long term targets and this market is struggling with this choppy, volatile price action.

They both have valid arguments, but I think the more important point is do producers hold out for those prices or take advantage of what's offered now. At 11-year highs, one would think that decision would be easy. We also should take a long look at '08 and '09 prices. What are the odds of increased acreage this fall? I would think very high, not only here in the US, but worldwide. With wheat prices this high, and corn prices sharply off their highs, there is huge incentive to plant as much wheat as possible.

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