U.S. Wheat still not price competitive

[melvill]

Interesting note this morning from a large U.S. market consulting firm on the price competitiveness of U.S. wheat and the world wheat market in general:

1. there is 'interest' from world importers as U.S. wheat prices decline, but
2. US wheat is still often not price competitive in the larger import tenders,
3. world buyers appear to be relatively patient, and
4. other world sellers are anxious to get rid of whatever remaining old-crop inventory they have before their new-crop harvest begins.

Interesting, isn't it, how importers switch from near panic buying to very measured and calculated buying.

[Fransisco]

Heck with oil,and corn tanking right now I'd be patient too.

[parsley]

melvill,

Bhroom, bhroom.

Jolt. Screech. Hiccup. Stall.

Are you still stranded in Oak Lake with that car?

Learn to drive the damn thing or sell it.

I'll give you $200.00 cash.

Parsley

[TOM4CWB]

Dear Lee,

Interesting how some folks try to bluff sellers into dumping!

Take a look at what is really going on!

"Highlights
Wheat futures continued lower this week, buffeted by outside markets and technical trading, while last week's USDA report added fundamental bearish pressure. A surprisingly large export sales report, along with growing import demand that appears likely to tap U.S. supplies, were outshadowed by political developments in Argentina. Corn and soybean prices came under pressure on improved weather in the Midwest while crude oil fell 10%. For the week, September delivery positions at both the CBOT and KCBOT fell 27 cents/bu and the MGE was off 9 cents/bu. Corn prices were down 82 cents/bu while August delivery soybeans declined $1.46/bu.
Export sales continue at impressive pace. HRW demand remains very strong with sales approaching 350,000 MT this week as quality sensitive buyers in Africa, Latin America and Asia currently have limited global alternatives. SRW demand is benefiting from buyer confidence that sales will execute, picking up another 200,000 MT this week despite Black Sea supplies being priced $30-$40/MT under SRW in the important North African market. Sales of all classes combined for 748,000 MT on the week, taking year to date sales to 10.6 MMT, 26% above this week last year and 82% higher than July 2006.
A tale of two winter wheats is developing with diverging demand outlooks for SRW and HRW. This week's Egyptian tenders showed SRW priced well above competing supplies in that market. The Egyptian demand will be missed with SRW production up 70% this year. Near-term supply availability for grain that competes with SRW is increasing with impending harvests in Eastern Canada, the Black Sea and Western Europe. HRW production is forecast up a more moderate 8% while export demand has been on fire. HRW sales are 82% above this week last year and 212% above 2 years ago. Access to Argentine supplies remains constrained while other exporters lack supplies, keeping the export outlook for HRW strong through the calendar year until the Australian program begins in January. Because futures markets remain unresponsive to these fundamentals, export basis prices are absorbing the supply and demand reality with SRW basis falling again this week to a record $1.20/bu under Chicago while HRW basis increased to 90 cents/bu over Kansas City.
High protein basis premiums fell this week despite HRS conditions falling sharply, dropping below the 5-year average for the first time this season as the Northern Plains continue to lack moisture. HRS basis fell 20 cents/bu in new crop positions on weak export demand as European buyers wait for the German harvest that is expected to begin this week. Further increasing high protein supplies, protein content in the HRW crop improved dramatically as the harvest moved north. The premium for 12% over 11.5% protein HRW fell to 10 cents/bu this week in Gulf ports, down from 50 cents/bu last month. Traders suggest that protein premiums could fall further.
Middle Eastern demand gained attention with tenders from Turkey, Syria, Oman and Jordan and large imports by Iraq and Iran looming. Iraq issued a tender this week while another 300,000 MT of HRW is reportedly under consideration. A 65,000 MT sale of HRW to Iran was reported this week. According to USDA data, it was the first U.S. sale to the country since 1981/82. As recently as 2000/01 Iran booked over 6.3 MMT, tapping Australia, Canada, the EU and Argentina. With exportable supplies currently short in those origins and the Iranian commerce minister announcing that the country needs 5 MMT of imports over the next 6 months, traders expect Iran will purchase significant quantities of HRW over the summer.
Australian weather remains a key market driver, although the most important weather period for the crop is still a month or more away. A particularly dry June and early July in Western Australia is concerning enough to keep producers from hedging their crop, having been hurt from 2 successive droughts, but recent rains have restored optimism among forecasters.
Argentine drama continues as the Senate voted down the tax on agricultural exports with the deciding vote being cast by the Vice President. The vote shocked markets, taking the entire grain and oilseed sector lower Thursday. Argentina's Agriculture Secretariat cut its forecast for wheat planted area for this season's harvest to the smallest level in 16 years, saying that dry soils delayed planting in many areas, leading farmers to switch to later-planted crops such as corn.
Freight rates fell as physical markets remained quiet and the Baltic indices slid. Rates indications in the Atlantic are down $3/MT and the Pacific fell $4/MT."

http://www.uswheat.org/priceReports/doc/A9D54BF9026CA4738525748A006B8D63?OpenDocument#

Much hope that wheat marketers/growers start dumping...

[melvill]

Tom I only read a little of your post. My boss would cut my pay if he knew I was reading long things like that.

Are you suggesting that a very high profile Memphis company may have a hidden agenda with its comments on U.S. wheat price competitiveness?

[TOM4CWB]

Lee,

Is that your excuse for signing a 3 page legal document... and then getting caught red faced... as well?

If you can't read these kind of documents... then your boss SHOULD be questioning what your purpose is!

[davidw]

Outstanding US export sales, sales made but not moved, have been at over 7Mt since April, on a par with what they were a year ago and probably double what until last year would be considered normal - about 6 weeks actual exports and time to arrange for shipment.

Last October they peaked at about 12Mt. I would say that importers are still a little anxious, even though a big crop looks increasingly certain.

[TOM4CWB]

Dear Davidw;

This quote tells a story of the world wheat market filling demand through the US...;

"Sales of all classes combined for 748,000 MT on the week, taking year to date sales to 10.6 MMT, 26% above this week last year and 82% higher than July 2006.
A tale of two winter wheats is developing with diverging demand outlooks for SRW and HRW. This week's Egyptian tenders showed SRW priced well above competing supplies in that market. The Egyptian demand will be missed with SRW production up 70% this year. Near-term supply availability for grain that competes with SRW is increasing with impending harvests in Eastern Canada, the Black Sea and Western Europe. HRW production is forecast up a more moderate 8% while export demand has been on fire. HRW sales are 82% above this week last year and 212% above 2 years ago."

The basis levels in the US on DNS and HRW also prove the market does not believe the US futures are over priced... at this time!

[melvill]

Tom, I don't know what "Is that your excuse for signing a 3 page legal document... and then getting caught red faced... as well?" is referring to.

However, the sales figures for U.S. HRW may be a little misleading. If I read it right, those numbers aren't referring to year-to-date. They're referring to one week this year compared to the same week a year ago when the U.S. hard a short crop. I'd have to look up the numbers for two years ago to see the reason.

Again, I ask you the question: Are you suggesting that the Memphis consulting firm has a hidden agenda?

[davidw]

The sales todate include sales made for shipment this US crop, about 3Mt shipped since June 1, and about 7Mt outstanding sales.

[TOM4CWB]

Dear Lee,

Clearly... if you attended (which I remember seeing you I am sure) a certain outlook last fall in Calgary... Jerry Gulke and I sat together... and talked through at great length the 'record' of this certain group.

They are simply awful at wheat... and last fall was the perfect example of why.

Do you remember what they forecast for prices winter 07-08?

Do you know how much that forecast 07-08 cost many wheat growers?

Does the CWB justify its market performance on the records of such co's?

I just have a real problem with predicting the future... in this environment... with this kind of volatility.

US Wheat associates has been one of the least biased... best info sources... I have tracked... next to Jerry Gulke that is!

Some of the best things in life... can be 'free' if we know how to appreciate them... and listen closely... counting the chickens... before they are hatched... has ALWAYS been a bad Idea... and reaping what we sow... is a principal that can't be disputed!

GRIN [ :

[TOM4CWB]

Dear Lee...

Here is a good article... that simply points out the obvious... to any sane person with an ounce of common sense... and I will ask a simple question AFTER you read it... please!

Just GRIN ... Bear it... and READ it Lee!

4. CWB Counterpoint
by Alan Tracy, USW President

The chairman and CEO of the Canadian Wheat Board are in Geneva this week, using free trade rhetoric but harboring a protectionist agenda. Their goal is to protect their precious western Canadian wheat export monopoly from proposed WTO rules that could ban such monopolies. The U.S. and the EU are leading the charge for change, and the CWB is urging negotiators to soften the language into a number of as yet undefined "disciplines" that probably will be impossible to enforce.

We believe that western Canadian wheat producers deserve the opportunity to sell their wheat to whomever they choose and that they will benefit from real competition for their wheat and barley crops as they do now in canola, sunflowers, beef, flax and just about everything else they raise. As the Western Canadian Wheat Growers Association recently pointed out, western wheat and barley are the only Canadian commodities aside from plutonium that cannot legally be sold to the highest bidder. Despite ample evidence that most growers want to choose where to sell their wheat, the CWB has fought them at every turn. The growers have no choice but to deliver their milling wheat to the CWB monopoly. Consistently, the CWB's captive growers earn less per bushel than their neighbors south of the border are able to achieve from the open U.S. marketplace.

The CWB executives are buttonholing everyone they can in Geneva to say that the CWB's pricing policies are not trade distorting. But it is just spin. The primary difference between the CWB monopoly and an open market is their tight control of the supply, which allows them to set their prices administratively, and often differently, from market to market. Any time a price is set by fiat rather than a competitive marketplace it is bound to move trade in ways that would not occur in an open market. That is the very definition of trade distortion. The CWB monopoly has price manipulation and trade distortion as the primary goals of their operation. To repeatedly claim that they do not distort trade is absolutely disingenuous. Rolf Penner, a Manitoba wheat grower and Vice President of the Western Canadian Wheat Growers Association, recently said it best: "To suggest the CWB is not trade-distorting is patently absurd. For the CWB's statement to be true, it would mean that trade flows would be identical if the CWB did not exist. Surely no one, except the CWB, is willing to make that claim with a straight face."

Along with many of their farming brethren in Australia, who just this month were freed from the shackles of their own wheat monopoly, U.S. wheat producers hope that the WTO can help our northern cousins gain the marketing freedom that the CWB has thus far denied them."

http://www.uswheat.org/wheatLetter/doc/3B70AD5BCE37115585257490006F1FF0?OpenDocument#

Now... DEAAR Lee... who exactly is it that is "Still not price competitive'!?

GRIN { :

Accurate information...
In the mind of a fool...
Means far less...
Than the thoughts...
Of a humbled person...
With a good memory!

You can quote me Lee!

You still haven't shared... yet... how that old Ford car is working for you!

GRIN { ;

[melvill]

Tom, you cajoled me into reading the last long post. Grin. I have to confess that I have a hard time believing that the US Wheat Associates is an unbiased organization. Their job is to promote US wheat. I guess I'd feel more comfortable about them if I knew that they hadn't supported the U.S. tariff on Cdn wheat a few years back.

No the old Merc isn't home yet. Can't drive it home without an Alberta safety inspection and can't haul it home. Apparently my pickup won't trailer that much weight. Suppose your diesel jeep would trailer 5600 pounds including trailer?

[melvill]

I got distracted from the original intent of this thread. The Memphis company was saying that U.S. wheat was to highly priced for many tenders. The company wasn't forecasting prices for down the road.

Further, I noticed that another company was saying that U.S. spot basis levels were unusually weak which further suggests that US futures prices are an 'island unto themselves' interms of world wheat prices.