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Monday, February 11, 2008

More on the Agriculture Bull Market

The USDA, in its February supply and demand report Friday, cut its estimate of wheat ending stocks to 272 million bushels, a drop from 292 million in January and the smallest amount in 60 years.

As a result, on Friday,
March wheat on the Minneapolis Grain Exchange leapt the daily 30-cent limit to $15.53 a bushel. Options trading, which has no limit, values the contract at $20 or $21 a bushel.

It's wild stuff. Here are some stories of interest ...

#1) Wheat Soars to Record as U.S. Stockpiles Head for 60-Year Low

Wheat futures in Chicago breached $11 a bushel for the first time, rising by the exchange-imposed daily limit for a sixth day after the U.S. forecast its lowest inventories in 60 years. Stockpiles in the world's biggest exporter will drop to 272 million bushels at the end of May, 6.8 percent less than expected a month ago and down 40 percent from a year earlier, the U.S. Department of Agriculture said in a report Feb. 8. Inventories will be the lowest since 1948 when farmers grew less and shipped supplies overseas to help countries rebuild after World War II.


#2) Future looking bright for Aussie wheat farmers

Australian production estimates for the current crop was left unchanged at 13 million tonnes, just over half the initial 25 million tonne estimate. Exports were unchanged from an earlier forecast at 8 million tonnes. Estimated exports in the last crop year in Australia were 8.73 million tonnes.

With good rains across much of NSW, Queensland, parts of Victoria and WA in recent months, the outlook for the new crop later this year will be excellent and we might have a chance of meeting the usual optimistic early forecasts.

Also ...

US traders and commentators say these rises are bad news for food price inflation in the US and around the world and open up the difficult possibility of surging food prices while the US economy is slumping and people are losing jobs and incomes.

#3) Agricultural Index Investments Soar to $1.5 Billion in One Week

Investments in agricultural- commodity indexes soared to $1.5 billion in the week ended Feb. 5, almost double the previous weekly record, UBS AG said.


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