U.S. futures markets closed higher this week on the possibility of increased wheat export business based on rumors that Russia may limit exports or impose export tariffs. Basis prices were 5 to 10 cents firmer thanks to stronger demand. A weaker U.S. dollar also supported wheat prices this week. CBOT led the way, gaining 37 cents to close at $6.47/bu. KCBT gained 33 cents to close at $7.00/bu and MGEX closed at $8.26/bu, a 28 cent gain for the week. The CBOT nearby corn contract gained 30 cents to $6.42/bu and CBOT soybeans closed at $12.19/bu, a 32 cent gain.
Markets reacted strongly this week to speculation that Russia’s government, which has said Russia should export no more than 23.0 to 25.0 MMT of grain during the 2011/12 crop year, might consider imposing export tariffs starting in April, when exports are likely to hit that level. Grain exports through mid-January reached a record 19.5 MMT, including more than 15 MMT of wheat. However, Russia’s Agricultural Ministry said it has no knowledge of plans to consider export duties. A USDA attaché report said Russian grain exports are expected to slow in the second half of the marketing year due to strong domestic demand and lower stocks available for export. The attaché does not expect grain exports to exceed 24 MMT in 2011/12.
U.S. commercial sales were strong for the second week in a row bringing total sales for the 2011/12 marketing year, through January 19, 2012 to 21.1 million metric tons (MMT). Net sales of 604,700 MT for the 2011/2012 marketing year were up 3 percent from the previous week and 59 percent from the prior 4-week average, and within trade estimates of 500,000 to 700,000 MT. U.S. soft wheat is now the cheapest in the world and likely to reclaim some business from competitors, such as Russia and France, that have seen prices rise on tight supplies.
Ukraine’s winter crops received fresh snowfall this week, which will provide protection from immanent severe winter weather, relieving concern of further crop damage. UkrAgroConsult said earlier this month that one third of winter crops were in poor condition due to severe drought conditions during seeding. Ukraine harvested 22.5 MMT in 2011/12, the third largest crop on record.
The Baltic Panamax index is at a 20-month low, closing lower for the fifth week in a row due to lack of freight demand and an oversupply of vessels. The index closed at 815 on Friday, down from 1,020 last week. Maritime Research’s Grain Freight Index fell for the sixth week in a row from 537.9 to 513.1.
The ICE Dollar Index closed lower this week at 79.01, down from 80.41 last Friday. (Feb 01, 2012)