Turn your attention to Wednesday's Export Demand page in the Allendale Advisory Report, very impressive world demand as new crop supplies are harvested. Iran announces its wheat imports are likely to double to 5 million tonnes as a result of drought. Western Europe is beginning to show signs of dryness. Bearish to wheat futures is a large world wheat crop expected to increase world stocks by as much as 17 million tonnes over year ago levels. Also bearish to wheat futures is the recent liquidation of corn futures.
Taking a look at Wheat crop marketing, $6.50 cash wheat requires 4.8 cents of carry per month. If not hedged, make certain your local cash markets are offering you sufficient carry. The present July-Dec wheat futures spread is offering 34 cents carry (actual cost is 24 cents) Allendale recently rolled its July hedges directly to the December to cover the cost of carry and added the remaining balance to its merchandizing ledger. We see no reason to hedge new crop above the 65% level we have on for now. If you have not rolled July hedges to the December, Allendale recommends doing so immediately.
Technically the wheat market has turned from neutral to bearish. Fundamentals are mainly neutral to slightly bearish.
Allendale has decreased 2008/09 carry in stocks by 52 million bushels, which decreases projected 2008/09 ending stocks by the same amount to a level of 480 million. This compares to 532 million in June. Allendale's ending stocks-to-use is estimated at 21% versus 23% from the previous month and compares to year earlier levels of 11%. Here is a point where Allendale has a huge discrepancy with the USDA. 2007/08 ending stocks-to-use projected a Season Average Price of $6.50 per bushel. The most recent June WASDE had the ending stocks-to-use at a level of 22%. Common sense would suggest if the stocks to use are double that of a year earlier, the season average price is likely to be reduced from $6.50/bushel. Not by USDA accounting, they estimate the season average farm price to be $7.50 per bushel for 2008/09. USDA has not responded to our curiosity.
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