Flour Update:

Market Highlights

March,2008

USDA Crop Reports Summary 03/11 08:49

USDA cut ending stocks of soybeans and wheat in the U.S., left U.S. corn
ending stocks unchanged, and increased ending world stocks of wheat, corn and
soybeans. The record-low U.S. soybean ending stocks may warrant a bullish
reaction in the futures market Tuesday, said DTN Analyst Elaine Kub.

WASHINGTON (DTN) -- USDA cut its projections for U.S. ending stocks of both
soybeans and wheat but left corn unchanged in supply and demand tables released
early Tuesday.

DTN on-line customers, for full access to the supply and demand report
click:
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1194

DTN on-line customers, for DTN's exclusive audio comments on the report
click: http://listen.aghost.net/images/e0010013/usda.mp3

Projected U.S. soybean ending stocks for 2007/08 were reduced 20 million
bushels, to 140 mb. This figure was lower than even the most bullish pre-report
estimate, DTN Analyst Elaine Kub said, so this may be the number that yields
the most reaction on the futures markets Tuesday morning. U.S. wheat ending
stocks were cut 30 mb to 242 mb, which was within the range of pre-report
estimates.

Corn ending stocks remained at 1.438 billion bushels. "Ordinarily, one might
see some long liquidation by disappointed market bulls after such a report,"
Kub said, "but with buying and selling interest spilling over so easily from
one crop's futures market to another's, the corn futures market may be
susceptible to support from soybeans and wheat and therefore maintain its
higher trend."

Biofuels use figures, another category from the U.S. Supply and Use tables
that had potential to get some bullish reaction from futures traders, actually
came out bearish Tuesday morning, said Kub. Ethanol projections are unchanged,
but soybean oil use for methyl ester (biodiesel) was cut from February's
3,400-billion-pound figure to only 2,800 bp.

Corn exports remain pegged at 2.45 mb; but wheat and soybean export
projections, which were running well ahead of pace leading into Tuesday's
report, were both bullishly bumped higher, according to Kub. U.S. wheat exports
are now seen at 1.225 mb, and U.S. soybean exports are pegged at 1.025 mb.

World ending stocks for wheat, corn and soybeans were all increased. For
wheat, world ending stocks were raised 0.7 million metric tons to 110.4 mmt.
For corn, world ending stocks were projected 2.1 mmt higher, at 104 mmt, and
for soybeans, world ending stocks were raised 1.62 mmt, to 47.44 mmt.

The increase in corn global stocks reflects a 3-mmt hike in Brazil output,
with smaller increases in India and the Philippines. The increase in world
soybean ending stocks reflected an increase in production estimates for the
2006/07 crop year in Argentina.

For the wheat in the U.S., the lower ending stocks reflected an increase of
5 million bushels in food use and a 25 mb increase in exports. The
stocks-to-use ratio for wheat dropped to 10 percent, the lowest since 1946-47,
the department said. Global wheat stocks increased on expectations for bigger
crops in Brazil, India, Australia and the EU-27, partly offset by a reduction
in Saudi Arabian output.

February,2008

"A picture states a 1,000 words... look at this chart; just amazing what spring wheat has / continues to do."

January,2008

Export sales released on Thursday buy USDA reported 404,000 metric tons of wheat, 2,369,000 mts of corn, and 965,000 mts of soybeans. These sales numbers were on the high side of traders expectations. Egypt bought 180,000 mts of U S soft wheat overnight. This weeks export sales were over twice as many as last week and up 99% from the 4 week average. Rumors of Turkey, Pakistan, South Korea, Japan, and Jordan tendering for wheat in the upcoming weeks, signals that demand is still not being rationed.

Cold weather is expected to dip down into the midsection of the U S but adequate snow cover should protect the HRW wheat areas of the southern plains. SRW wheat areas are at risk.

Otherwise, more of the same is on tap for the wheat market next week on its price discovery mission to ration world demand.

Week Ending June 8^th,2007

Wheat futures continued their march toward contract highs again this week; however, with winter wheat harvest closing in on the market, this week’s price action has been choppy. Possible freezing temperatures last night in Nebraska and Colorado along with some disappointing yields from the Easter freeze areas are supporting prices today.

This past Monday’s USDA crop progress report was supportive to winter wheat with a decrease of 4% points in the good/excellent category. This was countered by the continued increase in the spring wheat crop conditions. USDA reported that 85% of the spring wheat is in good/condition which is up another 6% from the previous week. Wet weather in Texas and Oklahoma has been hampering harvest progress as only 1% of the crop had been harvested as of Monday. Weather forecasts are drying out so there should be some harvest progress reported on this Monday’s report.

Thursday’s export sales report showed 347,000 metric tons and of that, 99,000 metric tons was HRS wheat. These estimates were in line with trade estimates and basically another non event.

Spot basis levels in Minneapolis continue to be sluggish. However, today’s pop in 15 protein basis levels of $0.20/bushel could be a sign that traders want to start to build in a protein spread on higher protein wheat as growing conditions are near ideal in the northern plains growing regions. The old rule of thumb is that there is only so much protein per acre of production (though not necessarily true with today’s agronomics). Traders are beginning to fear that both the HRW and HRS wheat crops at this stage of development have the potential to be low in protein, because of the high yield potential anticipated.

Week Ending April 13^th,2007

Wheat futures rounded out the week on a strong note. Friday’s changes of next week’s weather forecast for the Corn Belt calling for cooler and wetter conditions, had corn closing out the week sharply higher with wheat tagging along. Traders are also still concerned about the damage to wheat from last weeks freezing temperatures. Recent price action has wheat futures moving back towards the highs of last fall. For the week, wheat futures gained $0.20-0.34/bushel with CHI leading MN and KC in inter-market spread trade. It should also be noted that front months intra-market spreads are very narrow with little carry.

Next week all eyes will be on Monday’s crop progress report. Traders will be looking at HRW and SRW wheat conditions, HRS wheat planting progress, and corn planting progress. Corn Belt weather forecasts will also be watched as we need to get 90 million acres of corn planted. Markets will be very quick to add risk premium into values if traders begin to see planting delays.

Week Ending February 2^nd,2007

This past week did not produce much fundamental market moving news. Futures opened lower on Monday and tested some support levels, held these levels, and then worked higher to end the week unchanged to slightly lower.

The Canadian Wheat Board announced this week that they are increasing their wheat export goals by 10% to 13.3 million metric tons. Along with this news, Statistics Canada reported December 31st wheat stocks to be 22.3 million metric tons which is down about 7% from last year’s 23.9 mmt’s. These estimates were well below most analysts’ trade guesses. I talked to the CWB this week and they also are anticipating significantly decreased HRS wheat plantings due to producers switching to more durum and feed grain acres. It was these fundamentals that supported the futures market back up to last weeks closes.

Export sales announced this week by USDA totaled 560,500 metric tons with only 58,000 mt’s being HRS wheat. These sales were within trade estimate ranges.

Spot receipts this week in Minneapolis were the lowest in several weeks. The spot market has been very flat on the high end but it is noteworthy that the low end of the spot protein ranges is now very close to the high end. Protein premium spreads continue to be very flat with 15’s widening out on 13’s and 14’s due to west coast demand originated from specific lower ($) spread point locations.

Cold weather moving across the Midwest coming down from Canada this weekend and early next week is creating some talk about winter kill; however it appears most HRW wheat areas do have adequate snow cover so any potential damage should be minimal. SRW wheat areas in Mo, IL, and IN are the most vulnerable due to spotty snow cover.

Wheat should continue to follow corn as we go forward into spring. The WN/CN spread that the trade feels wheat will work its way into feed rations is about $.60/bushel premium to CN. Tonight’s close is essentially right there. HRS wheat planting intentions will be an important focus in the upcoming weeks as traders assess various wheat supply/demand scenarios and their implications on prices.

Week Ending January 19^th,2007

Wheat traders came back from the long weekend with a different mood then they had on report day last Friday. Export shipments were dismal; the HRW plains states got another shot of moisture, and huge net fund long positions were the Tuesday morning market moving fundamentals. This recipe sent futures markets lower. Other market moving news this week was Canadian plantings estimates, this morning’s good export sales, and a private analyst’s US planting estimates. The wheat market chopped around all week with strong daily early trading and weak closes (not a sign of a healthy market).

USDA reported export of 825,000 metric tons, which was well above traders expectations. It seems ironic, that all we have been hearing about is the lack of export news and now that we get some, the market reacts negatively. This number was the 2nd largest sales number in the last 7 months.

Basis levels in Minneapolis were essentially unchanged this week with a very small car count. It appears that protein spreads have narrowed on the lower proteins, and deferred offers are reflecting a small premium for higher proteins, likely do to some better West Coast demand.

With wheat markets gaining sharply recently on the heels of corn and ethanol demand, commodity funds have accumulated huge net long positions. Falling oil prices at some point will put the skids to rising ethanol/corn prices. As we go forward in the upcoming weeks, fundamental news may be sparse, which will add volatility and uneasiness. Remember, bull markets need daily feeding!

Week Ending January 12^th,2007

“BOOM”! That would probably be a one word reaction to Friday’s market action. Twelve days into the New Year, with commodity markets being on the defensive for the past 2 weeks, the USDA January crop report on Friday reversed market direction with violent vengeance. Wheat futures had been weak due to commodity fund liquidation, index fund reallocation, and much improved growing conditions in the plains HRW wheat areas.

Corn production fell 210 million bushels (-2%) from the December estimate and down 577 million bushels (-5%) from last year. Corn ending stocks were down a whopping 183 million bushels (-20%) from the December estimate AND down 1.219 billion bushels (-62%) from last year.
Grain futures opened up sharply higher with corn locking up the 30 cent limit early on, soybeans were up 40-50 cents, and wheat was trading up the 30 cent limit by mid session. Soybeans and wheat sold off some on the close; however, corn closed the day locked limit up.

Spot basis levels in Minneapolis were firmer this week as domestic mills appear to be working through the glut of first half January “too arrive” applications. Cold weather is forecast for the northern plains this coming week, so wheat loadings may slow down some.

With today’s fundamental news, it is now going to become a battle between individual crops for a finite amount of planted acreage this spring. The producer will be studying revenue/input costs for all crops and he will grow those crops that impact his net income the most. Given tonight’s grain futures prices, spring wheat NEEDS to buy acres. Corn, soybeans, and barley, all are at an economic advantage to wheat. It appears the dynamics are changing, and the wheat end user cannot 100% count on the producer’s historical romance with wheat to continue without price reward.

Week Ending January 5^th,2007

Wheat futures ended 2006 with a rally and began 2007 with sharp losses. Traders came back to work on Wednesday after a long 4 day break and immediately the bears took control of the wheat futures until today never looked back.

The major catalyst was the large moisture laden storm that began in Colorado and moved across the plains dumping much needed wet snow on parched dormant wheat plants. Today’s noon forecasts have the plains drying out with no active storm systems on the radar and temperatures continuing to be mild. This morning’s export sales figure was a meager 135,000 metric tons which was in line with trader’s expectations. Other negative fundamentals that are weighing on futures markets are the US dollar gaining strength, weakness in the corn market, and large commodity fund long positions. Rumors of index funds reallocating risk positions out of grains and back into energy and stock indexes also are pressuring prices.

Cash spot receipts in Minneapolis appeared meager at face value as the daily car counts were less than 100 each day this week. However, it appears that all domestic mills were deluged with January applications on the first trading day of the month. Thus spot demand for cash wheat is almost nonexistent. Basis levels continue to be stagnant. Flour sales this week were very active, even in deferred months as buyers took advantage of the large futures price break to go ahead and extend coverage. “To arrive” offers have strengthened due to the futures losses as the producer has gone into the hold mode, looking for a rebound in prices back to near their recent highs.

With this week’s break, futures should chop around in a range early next week waiting for new fundamentals to either break technical support levels or push back through overhead resistance. Spot basis levels should regain some footing as domestic mills grind through their recent glut of January applications. Next Friday USDA will release in its January crop report, winter crop production wheat seedings, domestic and world supply/demand, and U S ending grain stocks.

Week Ending December 22^nd,2006

Wheat futures have rallied sharply this past week driven by strength in corn, dryness in HRW wheat areas, commodity fund buying, and anticipated influx of new index money pouring into commodity markets after January 1^st. Wheat futures have been in a declining channel since making new highs in October. With the recent strength and the ability to push above moving averages and close above the downward trend line, technical charts are beginning to turn positive.

Week Ending November 24^th,2006

Wheat futures were steady to firmer this past week. Being a holiday week, volume was thin and fundamental market moving news was scarce. Wheat essentially followed the corn market except on days when wheat gained on corn to bring the wheat/corn-spread relationship back inline.

Next week futures trade should resume its normal volume as traders return from holiday break. Fundamentals next week driving the futures market will be December deliveries, plains weather, new exports interest and the whims of the corn market. Today’s close was right at the resistance level. We will have to see next week, whether there is enough market strength to push into new territory and open up a new upside range.

Week Ending November 10^th,2006

Wheat futures ended the week moderately lower again with this week being the 4th consecutive week of lower closes. USDA estimates out this week confirmed the supply side of the market both domestically and worldwide. The other factor driving this week’s market is the strength in row crops, particularly corn.

Looking ahead to next week, absent any new world demand emerging, wheat futures will tag onto the coat tails of corn. With the huge speculative length in corn and wheat, market longs may tire and head for the door as the market corrects an overbought condition.

Week Ending November 3^rd,2006

Wheat futures closed the week out in a quiet fashion but again put in a turbulent week. There was divergence between wheat and row crop futures corn as soybeans were up 13-15 cents/bushel compared to wheat futures loosing 5-16 cents/bushel. Thursday’s market saw a sharp run up followed by a violent sell off in very nervous market topping action. Featured fundamentals were new commodity fund buying after the 1st of the month, strong weekly export sales, and strong row crop prices. For the week, CHI lost to MN and KC in inter-market spread trade.

Private Grain Analyst Informa Economics released private world production estimates Friday. They pegged Canada at 27 million metric tons, Russian wheat production at 44 mmts, Argentina production at 13.7 mmts and Australia’ crop at 11.5 mmts. With the exception of Australia, these countries had slight increases in production since their last forecast.

Monday’s weekly crop progress showed the winter wheat crop is now 91% planted/73% emerged, compared to last weeks 86%/65%, and the 5 year average of 91%/76%. The crop condition is rated 60% good/excellent compared to last week’s 58% g/e and 61% 5 year average. It would appear based on these estimates that the crop is going to go into winter dormancy in above average condition, but will need good spring moisture in order for one to expect a large production number.

Traders will again be watching for export sales and the stamina of the speculative community for signs of price direction in the coming week.

Week Ending October 27^th,2006

If one compares last Friday’s wheat futures closes to today’s closes, one might think this past week’s market action was a “yawner”. This assumption could not be further from the truth. Just today, WZ had a $.20/bu trading range and $.42/bu weekly trading range. Bullish fundamentals this week were the continued realization of shrinking world wheat supplies and confirmation of Iraqi wheat purchases. Countering these fundamentals were the recent weak technical action due to overbought conditions. For the week, wheat futures were unchanged to only down a nickel with KC gaining slightly on MN and CHI in inter-market spread trade.

The Australian Wheat Board reduced the Aussie wheat crop again to 9-11 million metric tons from the previous estimate a few weeks ago of 12-15 mmts. This news pushed wheat futures sharply higher on Wednesday within a dime of contract highs. The buying then dried up and prices rolled over and headed south, closing moderately lower for the day and signaling a major price reversal. Thursday’s lower close put more credence into the reversal. Argentina’s weather has been improving so production there should have stabilized or even increased.

The US winter wheat crop is now 86% planted with 65% emerged which is right inline with the 5 year averages. USDA also started rating the winter wheat crop conditions this week and the crop is 57% good/excellent and that is identical to last year’s rating at this time. It was noted the SRW plantings in a few states are lagging due to MI and OH due to cool wet conditions. Weather conditions in HRW wheat areas could use some more moisture before the crop goes into dormancy but there is precipitation forecast for those areas in the upcoming days.

Even though this past week exhibited historical market topping action, the coming week promises more volatility in the price discovering process.

Week Ending October 13^th,2006

This past week had to be one of the most volatile weeks in wheat futures history.

Catalysts for the gigantic move this week were the realization of the tightening of world wheat supplies. Early in the week market sources lowered Australian production due to drought conditions to 11-13 million metric tons, down from last year’s 24.5 mmts. This fundamental activated the fear emotion in soft wheat bears and the fireworks began with everyone heading for the door at the same time. Market liquidation caused by margin calls also fueled the rally. USDA confirmed the bear’s worst nightmare on Thursday estimating Australian production at 11.0 million metric tons. USDA also reduced the world wheat ending stocks at 119.0 mmts which is down from last months 26.4 mmts. US ending wheat stocks were pegged at 418 million bushels compared to last month’s estimate of 429 mbs. About the only bearish wheat # this week was Canadian production which USDA estimated at 26.3 mmts which was up from last months 25.9 mmts. Other estimates in USDA’s Thursday report were bullish corn and soybean production along with very price friendly US carry out stocks.

Monday’s weekly crop progress showed HRW wheat planting to be 69% completed versus 68% last year and 70% 5 year average. With the recent price rally, one can surely expect increased acreage planting. The southern plains is still dry, however, scattered showers have popped up in random areas. The extended 6-10 day southern plains forecast calls for cooler temperatures and normal precipitation.

Spot receipts this week in Minneapolis were less than previous weeks; however domestic mill demand is still very sluggish. Protein spreads appear to be narrowing with low protein gaining on the highs. Resellers are struggling to find low 14 pro trains for application as many millers are capping protein levels and rejecting high protein trains for application on low protein contracts.

Week Ending October 6^th,2006

What a wild week this was in the wheat futures market. Continued talk of tight world supplies caused by dryness in Australia, Argentina, and renewed dryness in the U S southern plains were the catalysts that influenced this week’s trading. For the week, wheat futures gained $.06 -.21/bushel. With all the dryness affecting world wheat supplies and the abundance of high protein hard wheat, demand for low protein soft wheat could increase.

Traders have been waiting for exports to pick up these past weeks and this week some long awaited confirmations occurred. Iraq purchased 300,000 metric tons of HRW wheat in two different announcements. Although traders were expecting more, this confirmation may be an omen of upcoming business due to tightening the world wheat supply.

This week’s weekly crop progress report showed 54% of the HRW wheat has been planted compared 53% last year and the 5-year average of 56%. After some good moisture the last several weeks, dryness has started creeping back into the major HRW wheat production areas in the southern plains.

Spot cash receipts this week in Minneapolis were quite heavy compared to past weeks. Basis levels have struggled the last few weeks. Due to the run up in futures prices, producers have sold a fair amount of wheat on a “to arrive” basis. Railroad placement dates are mostly current. In addition, with freight showing up on time and row crop harvest getting off to a slow start, country elevators are being forced to ship wheat into the spot market as opposed to canceling rail freight orders in a sloppy freight market. It is very unusual to see railroad service current in the thick of row crop harvest. Domestic mill pipelines are very full and without exporters stepping in to cover needs, the cash market continues to be sloppy at best. Historically, we usually see a basis appreciation trend develop in the September to mid November time frame, but it appears we may not see a significant basis rally this year.

Week Ending September 22^nd,2006

Wheat futures put in a strong performance this week based on last Friday’s technical reversal and good follow through buying this week. Shrinking world supplies due to dryness in Australia along with continued export optimism were contributing fundamentals to this weeks price rise. For the week, wheat futures advanced $.18 to $.27 with CHI leading MN and KC in inter-market spread trade.

This week the Australian Bureau of Agricultural and Resource Economics estimated this year’s crop at 16.4 million metric tons compared to the September USDA estimate of 19.5 mmts. This was about a 16% decrease due to the drought conditions of this summer. Dry conditions in Argentina and other countries are contributing to the shrinking of world wheat stocks.

Export sales released yesterday were on the high end of expectations at 519,500 metric tons. HRS wheat composed 117,600 mmts. Iraq had a delegation in the U S this week so there is speculation that they are looking to import up to 750,000 metric tons of wheat in the near future. Based on their past buying habits, any sales to Iraq are long drawn affairs so traders have gotten reluctant to believe it until it actually happens.

Technically it looks like wheat may have made its harvest lows and with this week’s price rally, has risen to technical levels that have established a narrow price range between the 20 and 40 day moving averages. We will now need new fundamental news in the form of exports to push prices into new levels, or else the markets will just chop around in the near term.

Week Ending September 15^th,2006

Wheat futures ended the week with a little bounce but overall for the week, the market was down $.16 -.24/bushel with CHI losing to MN and KC in inter-market spread trade. Not a lot of market making news out this week. Not much in ending stocks news, coupled with the lack of other fundamental news, wheat futures retreated in a southerly direction and slid lower the rest of the week. The lack of export interest continues to weigh on futures market now that we know what the supply side of the equation is going to be. With the break from the summer highs in futures prices and basis levels off considerably, the U.S. should be competitive in the world market and gain additional export business.

Week Ending August 4^th,2006

Wheat futures put in a very volatile week with wide technical swings the prominent feature. Bullish and bearish fundamentals this past week affecting prices were stabilizing HRS wheat crop conditions, good HRS wheat harvest progress, good weekly export sales, and friendly production estimates of US and Canadian HRS wheat.

HRS wheat weekly crop ratings showed continued slippage with all states showing a decline of 1-3 percentage points in the good/excellent category. Just 32% of the crop is in the good/excellent category. This will more than likely be the last crop condition report of the season. Early combine reports are indicating good quality everywhere, better yields than expected, and widely varied protein levels. What is surprising is the HRS wheat harvest progress of 22% versus only 7 % last year. Given this past week’s hot temperatures, traders will be expecting over 50% harvest completion in Monday’s harvest progress report. HRW wheat harvest is virtually finished with 91% harvested compared to 88% last year. Yesterday’s weekly all wheat export sales report totaled 583,400 metric tons, which was 80% over the 4-week average. HRS wheat exports were pegged at 165,700 metric tons. The Canadian Wheat Board released their latest estimate of the Canadian all-wheat crop at 22.7 million metric tons versus their June estimate of 23.6 mmts (-4%) and 24.8 mmts (-8 ½ %) last year.

With the full onset of HRS wheat harvest, basis levels have been weakening. South Dakota spot receipts are drying up as the harvest moves into North Dakota.

This afternoon’s (Friday 8/4) National weather Service 6-10 day forecast (Aug 10-14) continues to show above normal temperatures and below normal moisture prospects for the central US from Texas to North Dakota. We are approaching the HRW wheat planting window and we will need significant moisture in the next 45 days to ensure the new crop gets off to a good start.

Week Ending July 28^th,2006

The wheat market seems have fully digested the shortness of the HRS wheat crop. Monday’s USDA crop progress report appears to confirm that crop conditions are stabilizing and the trade will be waiting the outcome of actual combine harvest #’s. HRS wheat conditions were virtually unchanged at 34% in the good/excellent category. HRW wheat harvest was almost complete (86% harvested) with Montana being the only major state left at 47% harvested.

HRS wheat harvest in North Dakota should be in full swing next week. This week the Wheat Quality Council Annual tour has been surveying HRS wheat fields across the state of North Dakota and came up with an estimate of 31.7 bushels/acre. A report out of Canada this week indicated crop development ahead of normal and hot and dry weather has stressed crops especially in the Red River Valley region of Manitoba. Thus yield expectations are going down and protein expectations are going up. They are expecting harvest to begin in mid August. Therefore, extreme temperatures and little rainfall still have time to adversely affect crop development.

Basis levels in Minneapolis had a weak tone this week as it appears the eastern South Dakota HRW and HRS wheat crops are better than earlier thought. It appears that the short crop in South Dakota which was widely advertised early on, prompted domestic mills to put additional “to arrive” coverage on and consequentially now have pipelines very full. The question remains, when this near term glut of wheat passes, do mills have August adequate coverage and does the producer look at the current price structure and, because there is going to be a short HRS wheat crop, just put it away and let the market work.

Producers and HRW wheat traders are continuing to watch closely the long range temperature and moisture outlooks for HRW planting. Moisture levels are still very parched from Texas to South Dakota and the next 6 weeks are important to get subsoil levels recharged before the 2007 HRW wheat crop is planted.

Next week traders will be watching North Dakota combine results, new crop producer selling, Canadian weather, HRW wheat moisture prospects, and any hints of increased demand developing. Without any new bullish fundamentals, the bull is on life support.

Week Ending July 7^th,2006

Wheat futures rallied sharply again in MN this past week on hot weather forecasts for the northern HRS wheat growing areas. A well respected private crop analyst firm released their HRS wheat July estimate of 475 million bushels which is 30 million below last year and is the smallest HRS wheat crop since 2002. HRW wheat production is estimated at 1.287 million bushels versus the USDA 1.264 million bushel USDA June estimate. HRW wheat traders are now focusing on demand while the HRS wheat traders are still looking at the supply side of the equation, thus the disparity of the MN and KC markets.

On Monday of this week, the USDA released its June acreage report which showed HRS acres to be 14.6 million acres versus 13.9 million acres on the March estimate. USDA also released June 1st stocks at 568 million bushels which was 20 mb higher then the average trade guess. These neutral #’s were ignored by the bullish weather forecasts and the market took off. Monday afternoon’s crop progress report confirmed trader’s worries of the continuing deterioration of the HRS crop.

Weekend weather and next week’s North Dakota and Canadian forecasts will drive Monday morning’s opening. Buckle up and assume the brace position, its “summertime in the country”!

Week Ending June 23^rd,2006

Wheat futures put in a strong performance this week spurred on by the deterioration of the HRS wheat crop and the realization of the short HRW wheat crop. Strength in the MN cash markets this week have narrowed the intra-market N/U spreads from a carry to inverted due to the uncertainty of the both the HRW and HRS wheat crops.

HRW wheat crop conditions remained unchanged this week remaining at 29% good/excellent while HRS wheat declined a significant 7% in the g/e category to 60. This week’s deterioration of HRS in MN and ND is concerning given the overall HRW wheat crop prospects. Harvest is progressing ahead of last year with 38% completed as of Monday compared to 17% at this time a year ago. There were some showers around this week that may have hampered harvest progress and affected Test weights. Even so, Monday’s weekly crop progress should show Kansas well along and combines beginning to roll in Nebraska.

Spot basis levels in Minneapolis jumped significantly as domestic mills were bidding aggressively for loaded 14 protein trains. Even though spot receipts are higher this week (see above table); the majority of the cars for sale were sub milling quality with high damage and vomitoxin levels. Producers sold a percentage of their new crop on the price run up this spring, however with deteriorating crop conditions, growers will tend not to sell any more old crop till there is confidence new crop bushels will be available to cover early sales. Spot basis levels are going to be very volatile in the near term with large daily swings depending on domestic mills’ needs on any given day.

HRS wheat crop progress ratings, weather forecasts, and HRW wheat harvest progress will be the major fundamentals driving wheat prices early next week.

Week Ending June 16^th,2006

Wheat futures have been under pressure all week due to several fundamentals. Precious metals and energies have been weak, combines are rolling across Kansas, and showers have been occurring in North Dakota. The market appears to have digested most of the HRW wheat crop damage as the deterioration has slowed. Even though next week’s crop progress will likely show continued deterioration in South Dakota and Nebraska, the HRW wheat crop conditions are basically “yesterday’s news”. The trade appears to be comfortable with the HRS wheat crop, but history tells us, although it is easy to grow a wheat crop, a “quality milling crop” is a long ways from the bin. The wheat futures market will need some new fundamental to push into new highs. Row crop weather scares and HRS wheat deterioration are two possibilities. For the week, futures markets lost $.12–.16/bushel with KC losing to MN and CHI in inter-market spread trade.

HRW wheat crop conditions improved slightly last week gaining 2% in the good/excellent category to 29% g/e while HRS wheat declined 2% in the g/e category to 67% g/e. As of Monday, the HRW wheat harvest was 21% complete, compared to 8% last year. Thursday’s export sales reported a respectable 188,000 metric tons of HRS wheat. Also this week, one widely read private analyst increased HRS wheat plantings by 1.1 million acres which is about 7% over last year. The Canadian Wheat Board released a HRS wheat planted acreage estimate of 20.015 million acres, which is up about 500,000 acres from Stats Can’s April number by nearly 2.5%.

Week Ending May 19^th,2006

• Wheat futures prices have soared to their highest levels in nine years, topping $5.00 per bushel.
• Run up began with news from the Kansas Crop Tour. Crop estimates averaged 319 million bushels, shocking the market after last year’s 420 million bushel estimate.
• Another bullish factor in the market is the World Production Forecast, currently standing at 20 million tons smaller than last year.
• U.S. winter wheat crop continues to suffer in Western Kansas, Nebraska’s crop recently dropped to 36% good to excellent from 47% the week before.
• Rumors that Iraq is seeking to purchase 1.5 million tons of wheat contributed to this week’s rally. Flour prices will be higher for some time to come as the market tries to ration demand.

Week Ending May 5^th,2006

• Wheat futures and basis levels are firm to higher this week, in part on the switch from May to July as the basic future.
• Western Kansas continued to miss the precipitation that has washed over much of the winter wheat growing areas, causing concern and firmness in the market.
• The Kansas Wheat crop tour took place this week. Most projections were below last year, Oklahoma’s wheat crop is projected at approximately half of the size of last year.
• Volatility will continue, the market’s bias seems to be higher.
• The next major news for this market will come with U.S.D.A’s supply and demand reports due May 12^th.

Week Ending April 28^th,2006

• Wheat futures prices moved lower late this week; optimism over rain forecast for this weekend was the chief factor driving prices downward.
• Fund selling was evident as well, further adding to the downward momentum.
• Ability for Texas and Oklahoma winter wheat crops to improve is seen as diminishing, all eyes have turned to Kansas.
• Kansas winter wheat crop ratings have slipped, rain this weekend will determine Monday’s market opening at least.
• Wheat markets are being influenced by outside markets as well. Volatility and weather market are sure to continue.

Week Ending April 21^St,2006

• We’ve seen some weakness in Wheat futures markets since our last communication.
• Wheat coming to market was more than adequate to meet Holiday shortened week’s needs, which caused some softness in prices.
• Winter wheat condition declined further, limiting the downside to prices, much more rain is needed for this crop. Drought damage is being surveyed by Insurance adjusters at this time.
• Spring wheat planting is underway, but delayed in many areas that are receiving rain and sometimes snow.
• Same old story, but volatility is likely to continue for some time to come.

Week Ending April 14^th,2006

• We’ve seen two weeks of sharply climbing Wheat futures and steady basis levels since our last report.
• U.S.D.A.’s planting forecasts surprised the market with projected acres of wheat the lowest since 1972.
• Forecasts for dry weather contributed to the bullish atmosphere, delayed spring wheat plantings also contributed.
• Rains in Southwest are still needed to continue to improve this year’s winter wheat crop.
• Volatility will continue, perhaps for many months.

Week Ending March 31^st,2006

• Wheat futures and basis levels are firm to higher this week.
• The U.S.D.A. issued 2006 prospective plantings reports this morning. The market is reacting with sharply higher futures prices as plantings seem to be disappointing.
• Forecasts for winter wheat are favorable, with plenty of rain on the way.
• Beginning next week the market will start to digest weekly crop condition reports, usually a good source for market volatility.
• Prices are still fairly close to last week’s levels, which may prove to be the lowest we’ll see for a while.

Week Ending March 24^th,2006

• Wheat Futures prices have dropped sharply this week, reacting to recent rains and forecast for more.
• Export sales are sluggish, and fail to lend support in the falling market.
• Basis levels are steady as mild weather continues to aid decent rail on time performance. Forecast weather event for early next week could slow movement in the country.
• Funds continue to hold long positions which could have a dramatic affect if they choose to sell.
• Forecast widespread rain could be expected to continue to drive the correction in the market lower short term.

Week Ending March 17^th,2006

• Wheat Futures prices have dropped sharply this week, reacting to recent rains and forecast for more.
• Export sales are sluggish, and fail to lend support in the falling market.
• Basis levels are steady as mild weather continues to aid decent rail on time performance. Forecast weather event for early next week could slow movement in the country.
• Funds continue to hold long positions which could have a dramatic affect if they choose to sell.
• Forecast widespread rain could be expected to continue to drive the correction in the market lower short term.

Week Ending March 10^th,2006

• Weather market continues this week, wheat prices remain firm to higher.
• U.S. winter wheat prices are much higher than competition in the world market. These higher prices are necessary to ration demand.
• Wheat futures prices seem unwilling to move lower as long as drought in winter wheat growing areas continues.
• Today’s U.S.D.A. supply and demand revisions could drive prices even higher.
• We will need substantial rain at least in Texas and Oklahoma if we are to see lower wheat futures prices before May.

Week Ending March 3^rd,2006

• Another volatile week in the wheat futures market will come to an end near last week’s levels.
• Prices dropped sharply on an expected forecast for rain late next week, and then just as quickly rebounded when the forecast became less promising.
• Chances for rain to improve the Texas crop are dwindling, the next couple of weeks are crucial.
• We look for prices to remain at these levels with increasing volatility. Rain across much of the winter wheat growing area would be needed to provide relief.

Week Ending February 24^th,2006

• Wheat futures continue to set contract highs this week.
• Major influences on the market remain the same; funds, winter wheat crop miseries, and speculation over Iraq’s wheat purchase.
• Texas winter wheat crop is rated 91% poor to very poor at this time.
• Details still forthcoming for Iraq’s purchase, currently thought to be going to U.S. and Canada, but trade waits for more information.
• Without a major rain event there seems no reason for prices to back off of their current levels, and they seem to find no resistance moving higher still.

Week Ending February 17^th,2006

• Wide swings in Wheat Futures prices have continued since our last communication February 8th.
• Markets plunged following Iraq’s announcement that they would seek wheat from alternate origins because U.S. wheat was too expensive.
• Final decision has not been announced yet, some hope U.S. is still in the running, Iraq says they will announce on Sunday. Again don’t hold your breath.
• Markets have rebounded to last week’s levels on fund buying, strong export numbers and continuing weather concerns.
• Substantial rains could bring lower prices, but they are not expected until spring.

Week Ending February 10^th,2006

• New contract highs were set in Kansas City’s Wheat futures market yesterday, but price gains couldn’t last.
• Kansas City markets ended the day sharply lower; the drop was thought to be influenced by lower prices in other commodities.
• Fundamentals remain the same, drought in Texas, Iraqi sale, weather markets in Russia, and our new fundamental, the funds, remain aggressive buyers.
• Iraq is expected to make a decision regarding their purchase today, but if you’re wise you won’t hold your breath.
• Volatility still to come seems the market wants to move higher most days.

Week Ending February 3^rd,2006

• Wheat futures prices have settled near their levels from our last communication as we near the end of another volatile week in wheat markets.
• Focus this week has mainly been on Iraq’s expected wheat purchase.
• Wheat markets have reacted to the announcement; some think that if the sale does go to the U.S. the reaction is already priced into the market.
• World prices are lower than U.S. prices, however, and if the sale goes elsewhere it could lead to lower wheat prices.
• Several weather markets developing worldwide will also keep the volatility in the market for some time.

Week Ending January 27^th,2006

• Wheat futures rally sparked by Iraqi purchase announcement continues this week.
• Continuing dry conditions in winter wheat growing areas are another supportive factor for wheat futures markets.
• Millfeed values have dropped substantially in some areas, leading to higher flour prices.
• U.S. wheat continues to be priced higher than other export markets.
• There is some speculation that prices at or near these levels could lead to a technical setback in wheat futures.

Week Ending January 20^th,2006

• Wheat futures prices were pressured lower this week by weak export sales and the perception that U.S. prices are not competitive on world markets.
• Egypt purchased wheat from various other sources, sending the market lower.
• News that Iraq was seeking U.S. wheat surprised and rallied the market Thursday, reversing the entire week’s declines.
• Supply of wheat continues to outpace demand.
• Market is waiting for further Iraq news to determine direction at least in part.

Week Ending January 13^th,2006

• Wheat markets offered a little bit of everything this week, keeping interested parties on the seats of their chairs.
• Fund sell off continued early in the week. Wheat futures moved lower.
• Too much wheat came to market in wake of cheaper rail prices that took affect the first of the year, and higher prices following the recent rally. Basis levels dropped.
• Mid week the shift came as the market began to prepare for Thursday’s U.S.D.A. reporting which eventually lead prices higher.
• It’s possible we’ll continue to see these swings as the funds come and go, with the breaks providing buying opportunities.

Week Ending January 6^th,2006

• Wheat futures have reversed their trend following a three week rally that raised prices by as much as thirty cents per bushel.
• Basis levels have been soft. Millfeed values have failed to move from their high levels, but are still expected to do so soon.
• Rally had been lead by fund buying, and concern over winter wheat crop growing areas, where drought conditions have lead to wildfires in some areas.
• No rains are forecast for the crop in the next eight days, and no significant rain is expected until spring, but spring weather is much more critical to producing a winter wheat crop.
• While flour prices have moved higher and back to previous levels, we expect volatility to continue, with funds playing the wild card.

Week Ending December 23^rd,2005

• Wheat futures prices have moved higher over the past few weeks, some speculative buying and dry winter wheat areas were largely responsible.
• Basis levels are firm and are expected to stay that way. Unreliable rail logistics are a major factor in supporting the basis.
• Texas and Oklahoma are experiencing severely dry conditions with no relief in sight for next year’s winter wheat crop.
• As we head toward the New Year there is much speculation about what the funds will do and how what they do will affect markets.
• As we’ve seen, fund buying can override fundamentals, which at this time are not that supportive of prices. We expect increased volatility in the New Year.

Week Ending December 16^th,2005

• Wheat futures prices are slightly lower than they were at our last report two weeks ago. Basis levels are mostly unchanged; the exception is high gluten spring wheat, which has seen some decline.
• Millfeed credits are increasing with the season’s snow cover advancing.
• Gains in the market this week followed a speculative report that wheat was undervalued, which sent prices on an upward trend.
• Railroad performance is slipping, providing some support to basis levels.
• This can be a sporadic and unpredictable time of year, traditionally not a good time to be without coverage.

Week Ending December 2^nd,2005

• Wheat futures and most basis levels have rebounded this week, after a couple of weeks of weaker prices.
• Recent softness in winter wheat cash price could increase export interest as U.S. prices become more competitive.
• Fund buying has pushed prices higher this week as well.
• Hard winter wheat crop’s last condition report saw a further decline.
• We expect to see some choppier pricing through the Holiday season, as demand is strong, and winter logistics become more of a reality.

Week Ending November 18^th,2005

• Wheat futures prices are soft this week; market’s perception that export business will be slack has lead to this softness.
• Spring wheat basis levels for some proteins spiked this week.
• Recent purchase by Iraq is considered significant enough to support basis levels in the gulf for some time.
• New crop winter wheat needs rain to stop the decline in the crop.
• Thanksgiving Holiday week will likely be quiet in the market, winter weather will become a feature soon enough.

Week Ending November 11^th,2005

• Wheat futures prices are sharply higher this week.
• Rumors that India may need to import wheat were supportive to prices.
• U.S. 2006 winter wheat crop conditions declined, forecast for dry conditions begins to cause concern.
• Transportation costs have begun to ease, basis levels are still firm in most cases.
• Today’s U.S.D.A. supply and demand forecasts will help determine market direction short term.

Week Ending November 4^th,2005

• Wheat futures prices moved lower this week. Basis levels are higher, offsetting the decline in futures in many cases.
• Iraqi wheat purchase, which was announced last week, is still not confirmed which is leading to softness in market.
• Australia will be marketing a larger crop than expected, which will mean increased competition for U.S. wheat.
• Quieter tone to market is not likely to last for long, however it is too early for crop concerns to lead prices significantly higher.

Week Ending October 28^th,2005

• Wheat futures prices began turning higher Tuesday and have not looked back.
• Iraqi rumored large purchase of wheat has turned into a real purchase, helping to move prices higher.
• Wheat movement and farmer selling of wheat have slowed, further supporting prices.
• Record high freight levels are supporting the basis.
• Seeding of the 2006 winter wheat crop is nearly complete. Acres planted are expected to be higher than last year.

Week Ending October 21^st,2005

• Wheat futures prices have moved lower this week as commodity funds liquidated their positions.
• Basis levels are firm to higher, in many cases offsetting much of the decline in Wheat Futures prices.
• Rail freight continues to be historically expensive, supporting the basis and leading to higher flour prices.
• Harvest is underway in Australia and Argentina. U.S. wheat prices are not competitive, exports could come under increased pressure soon, possibly leading to a break in Futures.
• Export business to Iraq could turn the market higher if it materializes.

Week Ending October 14^th,2005

• Wheat futures and Basis Premiums continued their upward trend this week.
• Wednesday’s U.S.D.A. data lowered ending stocks sharply, surprising the trade, driving prices higher.
• Winter wheat futures and basis levels are particularly strong this week.
• Shortage of rail cars and high costs for all types of transportation will continue to support the basis somewhere near their current level for the foreseeable future.
• We expect these factors to remain in place through the winter, and do not expect to see much relief unless there is a dramatic change.

Week Ending October 7^th,2005

• Wheat futures prices have held onto last Friday’s gains and are closing the week higher.
• Cuts in U.S. all wheat production were larger than expected when U.S.D.A. reports were issued.
• Prices have rallied to last year’s highs already. On the world market prices for U.S. wheat are well above those of other exporters.
• Rail logistic problems combined with lack of farmer selling are supportive to prices at these levels. Run up of fuel costs and shortage of transport lead to the same results.
• Prices are likely to find support from these factors for some time.

Week Ending September 30^th,2005

• Cash wheat prices are largely unchanged this week; however a strong reaction to this morning’s USDA reports is forcing the wheat futures markets sharply higher today.
• Basis levels for winter wheat are very high, reflecting high transportation costs for wheat, and resulting in higher flour prices.
• Railroad logistics have been further compromised due to Hurricane Rita, slowing wheat movement in the country.
• Winter wheat planting is underway and making good progress.
• Over the next week we should know more about the market’s reaction to this week’s reports, but best guess is for higher prices all around.

Week Ending September 23^rd,2005

• Wheat futures and basis levels have not strayed far from the levels we reported in our last communication three weeks ago.
• Hurricane Katrina has made a slow and expensive transportation situation worse, and hurricane Rita is promising more of the same.
• Basis prices in the Gulf are as high as we’ve seen them, a large percentage of the increase and strength is due to the high cost of transporting wheat.
• Reports are that Canadian spring wheat harvest is improving, but poorly timed rains have taken their toll on wheat quality.
• Basis levels are likely to be high through mid winter. We anticipate that flour prices may be strong for some time to come.

Week Ending September 2^nd,2005

• High gluten spring wheat basis levels fell sharply as the harvest expanded. Spring wheat harvest is nearly 80% complete.
• There is speculation that Canadian wheat is replacing demand for U.S. wheat in export channels. This contributes to lower prices in the U.S.
• This week’s lower prices are not likely to draw necessary wheat to market.
• Transportation costs we referenced last week seem attractive as prices continue to climb. Rail and truck transportation will be expensive and hard to come by this season and key to keeping flour prices from extremely high levels.

Week Ending August 26^th,2005

• Minneapolis wheat futures were sharply higher this week, reflecting the market’s quality concerns with the spring wheat crop.
• The fast-paced climb in basis levels feels unprecedented as high protein spring wheat has risen by nearly $1.00 per bushel.
• These higher prices are due to two factors, higher fuel prices which have lead to a shortage of transport, and lack of wheat coming to market.
• Farmers are holding their crop for further handling. This will help them avoid the discounts they face from excessive levels of disease in their wheat.
• This is an abnormally volatile harvest season; we anticipate that these factors will continue to influence the market at least in the short term.

Week Ending August 19^th,2005

• Wheat futures prices are higher this week, with the exception of the Chicago market which has moved lower.
• Basis levels are sharply higher than levels last week, reflecting seasonal transportation slowdown, and spring wheat crop disease concerns.
• Costly transportation could convince sellers to hold onto their wheat crop. Basis levels are supported by these higher costs, and lead to higher prices for flour.
• Corn crop concerns have diminished with the passing of crucial pollination stage and a more favorable weather pattern. Surplus assures that yields are not a significant concern this year.
• Wheat futures continue to follow corn, with the basis doing the majority of the work to bring the crop to market. Flour prices are attractive.

Week Ending August 12^th,2005

• Wheat futures prices this week are slightly lower, as weather was improved in some areas for the row crops.
• Weather is still not what it could be; optimistic forecasts have eased market concerns at this time.
• Spring wheat harvest in South Dakota is moving briskly, more than 69 percent complete. Seasonal rail logistics are already delaying shipments to mills.
• Spring wheat high protein basis levels dropped sharply this week as enough wheat has been harvested to assure ample supplies of high protein, quite a change from last year’s harvest.
• Friday’s USDA report is expected to lower USDA crop estimates due to Spring wheat disease, but world supplies are still ample, which limits prices moving much higher.

Week Ending August 5^th,2005

• Wheat futures are largely unchanged again this week.
• Basis levels for Spring Wheat are sharply higher in some areas, reacting to the evidence of fungal disease found on the recent crop tour.
• Quality concerns for the Spring Wheat crop could support prices for some time.
• Forecasts for rain over the coming weekend are pressuring wheat futures prices late this week.
• Weather market continues, with wheat prices mostly following corn and soybeans.

Week Ending July 29^th,2005

• Wheat Futures prices are nearly unchanged from our last communication a week ago.
• Harvest pressure was replaced by corn crop concerns this week, prices turned higher.
• Winter wheat harvest is wrapping up; Spring wheat is being harvested in South Dakota.
• Concerns over yields from the Spring wheat crop are growing. Diseases could lower production numbers for this crop, supporting Wheat Futures prices.
• Weather continues to be the trump card in determining price direction, rain or lack of it will make the call.

Week Ending July 22^nd,2005

• Wheat futures moved lower this week, largely in sympathy with the downturn in corn and soybeans.
• Basis levels have been pressured lower as elevators move crops to market, clearing space for the upcoming harvest.
• This pressure leading to lower prices is likely to be difficult to sustain.
• Weather remains the market’s primary focus, and August forecasts rarely satisfy the need for widespread rains for all crops.
• Prices could rally from these slightly lower levels if conditions for corn and soybeans do not improve.

Week Ending July 15^th,2005

• Wheat futures are slightly lower than the levels we saw at this time last week. After working their way lower much of the week, prices followed corn and soybeans higher on Wednesday.
• Wheat markets are finding it impossible to resist the upward pull from row crops. These dry conditions could continue to support prices.
• Spring wheat crop ratings are very high.
• Producers have begun to sell, making space for the upcoming harvest. This has put some pressure on the basis, and we are seeing some lower basis prices in the past couple of weeks.
• Weather market continues, with Mondays often the most volatile day of the week

Week Ending July 8^th,2005

• Wheat futures are higher as we near the end of a very rocky week in the market.
• Basis levels are lower, as we have moved near the end of the winter wheat harvest.
• Declines in soybean values proved impossible for wheat to resist following.
• Dryness in row crop areas is expected to adversely affect crop conditions. This could be supportive to prices.
• Weather news will dominate the market near term, we expect price swings to continue.

Week Ending July 1^st,2005

• Wheat futures followed soybeans lower this week, retracing back to price levels we saw two weeks ago. Harvest progress and improved weather for row crops also pressured prices lower.
• Winter wheat harvest has made great progress in the last week to ten days, advancing from 10% complete to more than 66% complete.
• Spring wheat prices are likely to be at least a month away from moving lower. This season’s crop is in great condition, but warm weather will be needed soon.
• Dryness in some parts of the Corn Belt continues, which could lead crop conditions to be downgraded.
• Continued volatility is to be expected this time of year, this year will be no exception.

Week Ending June 24^th,2005

• Wheat futures prices are higher this week.
• Positive features supporting the market have been a strong market for soybeans and delays in the winter wheat harvest.
• Spring wheat conditions continue to be very good, a great start for this crop.
• As expected the protein in the winter wheat crop has been higher as the harvest moves into Kansas.
• General Mills expects this volatility to continue. The wait for harvest pressure and lower prices continues.

Week Ending June 17^th,2005

• Wheat futures prices are sharply higher this week. The U.S.D.A. lowered it’s projection of the winter wheat crop by 5% on Friday, a factor that was supportive to prices.
• Basis prices for Winter wheat and Spring wheat have climbed on concerns about low protein in the new hard red winter crop. These concerns are likely to ease as the harvest works its way further into Kansas.
• Spring wheat basis levels continue to rise sharply; prices for high gluten flours will remain high and climb as these levels have not eased. Basis is not expected to weaken in the near future, and hot weather in the upper Midwest will be crucial soon if this year’s crop is going to be an improvement.
• We expect these factors to remain in the near future; harvest pressure may be a long way off yet.

Week Ending June 10^th,2005

• Wheat futures prices have been declining this week, basis levels remain firm.
• Diminishing rains have cleared the way for the expanding winter wheat harvest, which pressured futures prices lower.
• Planting is nearly wrapped up for this year’s fall crops, spring wheat is rated 78% good to excellent, a very good start. Weather in the upper Midwest will need to become hot and dry soon.
• The U.S.D.A. June crop reports are due out Friday, June 10th; smaller winter wheat crop expectations could reverse recent downward trends at least temporarily.
• U.S.D.A’s report will combine with weather news to determine market’s direction over the next seven days.

Week Ending June 3^rd,2005

• Wheat futures prices were flat to slightly lower this week.
• Dryness in portions of Kansas continues to affect potential wheat crop yields. Conditions declined once again.
• Weather currently rules all row crop markets it seems; corn crop conditions are also supportive at this time.
• Rain that is needed in other areas has delayed wheat harvest in the southern states.
• We don’t expect to see much price relief in the short term.

Week Ending May 27^th,2005

• Wheat futures prices are sharply higher this week, basis levels remain firm.
• Winter wheat conditions continued to decline, eroding the potential yield for this year’s crop.
• Dry conditions in the former Soviet Union and Australia could reduce crop size in those countries as well.
• Winter wheat harvest has begun in Texas and Oklahoma, with good initial reports of yields.
• Long-range forecasts are not promising the rains the market wants to see in Kansas. We expect this volatile season to continue at least through June.

Week Ending May 13^th,2005

• Wheat futures prices seesawed this week, reacting to weather forecasts and U.S.D.A. reporting.
• Prices were sharply higher early this week due in part to drying conditions in winter wheat growing areas.
• Some rain has fallen over Kansas, and more is forecast for the weekend, which leads prices lower toward the end of the week.
• U.S.D.A. forecast for 2005 winter wheat production was also a negative factor on the market.
• Moisture, which can expand the crop is probably the crucial market driver at this time.

Week Ending May 6^th,2005

• Wheat futures prices moved lower this week while basis levels stayed firm. In the case of high protein spring wheat, levels are sharply higher.
• Millfeed values, a credit toward the cost of milling wheat to flour, are lower.
• Wheat crop tour reports a winter wheat crop in great condition. However, the need for rain to make the crop in the next couple of weeks was stressed often.
• U.S.D.A. reporting due May 12th will affect the prices of all of the row crops.
• Weather news is likely to drive market conditions short term as funds seem to be headed back where they belong.

Week Ending April 29^th,2005

• Wheat Futures and Basis Premium prices are higher this week.
• Index fund traders escaping Wall Street woes and looking for better investments have caused a run up in prices again this month.
• Spring wheat basis has been especially strong, with a break not likely before late summer. Millfeed values also continue to be low.
• Canada, U.S., and Argentina are planting smaller wheat crops this year. This increases the importance of good weather conditions during the growing season, and could dramatically increase volatility down the road.
• Cold weather is expected in Winter wheat growing areas this weekend, which will have the market’s attention on Monday.

Week Ending April 22^nd,2005

• Recent market softness ended this week. Market direction turned higher with funds nosing their way back into the wheat market.
• Lacking any fundamental support, climbing prices were expected to fizzle in short order.
• Winter wheat crop is in great condition.
• Cold weather is forecast with possible freezing temperatures in winter wheat growing areas. It is thought that the crop is not mature enough, and cold temps are not expected to last long enough to cause much damage.
• Cheaper wheat futures have been offset by lower millfeed prices in many areas, which keep flour prices from moving lower.

Week Ending April 15^th,2005

• Wheat futures prices are close to last week’s levels. Basis levels are steady to higher.
• Farmers are preoccupied with fieldwork and are not focused on selling at these prices.
• Rail performance remains dismal for this time of year as well.
• New crop hard winter wheat ratings are the best they’ve been since 1998. There are whispers of a one billion bushel crop.
• Watch for weather features, otherwise we expect similar conditions over the next 7 days.

Week Ending April 8^th,2005

• Wheat futures prices continued to work their way lower this week, as fundamental market factors replace speculative fund buying in determining market direction.
• Basis levels moved higher for hard wheats, offsetting some of the futures decline.
• Planting of fall crops is underway and expanding. Markets will begin to follow weather forecasts and crop condition reports to determine price direction.
• As we have experienced recently, however, fund buying could return leading to additional volatility.
• We expect to see further seasonal downward pressure on prices as the large winter wheat crop is harvested and marketed.

Week Ending April 1^st,2005

• Wheat futures prices have moved lower this week.
• Weather for new crops has been good. Dry areas received needed moisture.
• Export demand has been limited, not at levels that would prop up prices.
• Basis levels remain mostly firm.
• We don’t expect to see wide price swings in the near future.

Week Ending March 25^th,2005

• Wheat futures prices are lower late this week as funds turned from buyers to sellers, a situation that seems to change from day to day.
• Recent influx to commodity markets of fund dollars has been the major factor in determining futures prices.
• Heavy snow across the hard red winter wheat growing area was a great boost to the crop.
• Railroads are beginning to catch up on late shipments.
• This year’s soft red winter crop could be the smallest harvested since 1986, a factor that is very likely to influence pricing.

Week Ending March 18^th,2005

• Wheat futures markets continue to defy fundamentals as fund buying is in control.
• Fund buying continues to dominate market news this week.
• Wheat futures have chopped higher and lower this week but are set to end the week higher.
• Fundamentals are not supportive to higher prices. Winter wheat crop conditions continue to be strong, world carryover is high, and export demand is slow.
• Harvest results and weather factors can be expected to be in the mix within the next few weeks.
• The question is what will the funds do next? The answer is likely to largely determine where prices will go.

Week Ending March 11^th,2005

• Wheat futures markets continue to defy fundamentals as fund buying is in control.
• Money flowing into commodity markets is leading to higher prices.
• Brazil’s dry weather has contributed to rally in soybeans, but even if Brazil’s production is drastically reduced the world will have plenty of soybeans.
• World wheat supplies as estimated by the U.S.D.A. are plentiful. Estimated production is a record 622 million tons, ending stocks are estimated to increase as well.
• Periods when funds are active in commodity markets lead to increased market volatility and some confusion as markets stop responding to fundamental factors the way we would expect them to.

Week Ending March 4^th,2005

• Wheat futures have fluctuated higher then lower this week, as funds continued to be active in the market.
• Wheat followed soybeans higher, especially late last week, then reversed direction to give back some of their gain.
• Wheat futures prices have divorced themselves from fundamental market influence over the past week or two.
• Pricing direction has largely been determined by fund buying and selling as the basic future moved from March to May.
• This year’s hard red winter crop appears to be in very promising condition.
• Recent price fluctuations could calm over the next week, but spring is in sight, and with it comes a weather driven market.

Week Ending February 25^th,2005

• Wheat futures on all three exchanges followed soybeans sharply higher early this week.
• Short-covering by the funds as we switch from the March to the May futures was responsible for much of this strength.
• Fundamentals that drive the market are little changed from the past few weeks, and prices dropped back near their previous levels later in the week.
• Millfeed credits continue to be very low. The lower cost of millfeed credits results in a higher price for flour.
• As spring approaches the market seems poised to become more active. A much more volatile season could be right around the corner.

Week Ending February 18^th,2005

• We’ve seen some relief in flour prices this week.
• Spring wheat basis levels have finally eased from their historically high levels, but are still quite high.
• Export sales have been strengthening recently, but competitors like Australia, Argentina and Europe should keep this news from supporting prices to a large extent.
• Strength in corn and soybean futures prices supported wheat futures late this week.
• Prices are attractive at these levels. Weather features could arrive in the market within the next month, bringing springtime volatility with them.

Week Ending February 11^th,2005

• Wheat futures showed some strength this week, many flour prices moved higher.
• Basis levels have showed some weakness, but are still historically high. There are concerns that issues with wheat quality could support prices for the next several months.
• Export sales exceeded expectations over the past few weeks.
• Funds are active buyers this week, probably the most supportive feature in the market.
• We don’t anticipate sharply higher prices, as there are still many factors keeping the market from rallying.

Week Ending February 4^th,2005

• Wheat markets were calm and quiet this week, resulting flour prices are mostly unchanged.
• Producers are waiting for prices to rebound, and buyers are not feeling pressured to purchase until they see a threat of higher prices.
• Continuing logistic problems still support the historically strong basis.
• Chinese purchases would support prices if they materialized, but have not as yet.
• Flour prices are attractive at these levels.

Week Ending January 28^th,2005

• Wheat futures and flour prices generally lost ground this week.
• The market’s opinion seems to be that U.S. export sales will lose business to Argentina and the European Union. U.S. prices are higher than world prices at this time.
• Softer prices discouraged farmer selling, and rail logistics slowed movement, supporting both the futures and the basis and keeping prices from sliding further.
• Prices are attractive at these levels.

Week Ending January 21^st,2005

• There has not been much supportive news in the wheat market this week. Futures are lower; the basis for most grades and locations remains firm.
• Poor rail movement continues to support the basis. There is talk of some improvement, but no major change to the slow performance of the past many months.
• China has not bought U.S. wheat as some had speculated may happen. If China does purchase, it would be a supportive factor to prices.
• The European Union could begin to subsidize their wheat exports again this year. This news leads the market lower this week.
• We are seeing reports of some soft red winter wheat fields in standing water. This could be a supportive factor if it continues.

Week Ending January 14^th,2005

• Wheat futures and flour prices are unchanged to higher this week.
• Basis levels remain historically strong. High gluten flour prices moved up again this week as basis levels spiked.
• USDA reported smaller winter wheat area planted and increased U.S. and world carryovers. Markets were slow to respond as the first would usual lead prices higher and the second lower.
• Rail movement continues to be slow, pressuring the basis.
• Funds are active in commodity markets, adding some increased volatility

Week Ending January 7^th,2005

• Wheat futures markets have set new contract lows this week as we return to our market tracking following our last communication several weeks ago.
• Basis levels remain historically high. High protein spring wheat shortages have driven basis and flour prices for high gluten products sharply higher in the Western U.S.
• Producer sales have been disappointing in this first week of the New Year, railroad performance remains slow, hindered by extreme cold and snow.
• U.S.D.A. estimates on winter wheat plantings will be issued January 12th. Market is expecting a reduction, and a smaller carryover, which could lead to higher prices.
• We expect high levels of volatility in advance of and in reaction to next week’s reports. Prices at these levels could seem very attractive if the market reactions continue to be extreme.

Week Ending December 17^th,2004

• Wheat futures prices have moved higher since our last report, two weeks ago.
• Basis levels remain historically high.
• Producer selling was limited. There is speculation that this could change in the New Year.
• Railroads remain three to four weeks behind.
• Flour prices have been in a narrow, yet high range for the past few months now, which is likely to continue.

Week Ending December 3^rd,2004

• Wheat futures and flour prices have dropped dramatically since our last report.
• Slower U.S. wheat export sales, progress in the South American wheat harvest, and the excellent condition of the 2005 U.S. winter wheat crop lead prices lower.
• Large crops in the Southern hemisphere and a rebound in European crops are expected to increase their export market share this year at the expense of the U.S.
• World wheat supply is large enough to meet demand and prices on the world market are lower than U.S. export prices. This is helping to move futures prices lower.
• Final winter wheat crop report this season shows crop conditions are rated the best ever going into dormancy.
• Lower futures prices have slowed farmer sales, which had picked up. Rail logistics also continue to be a factor. We expect futures prices to remain under pressure, and the basis to remain steady to firm.

Week Ending November 19^th,2004

• Wheat futures and flour prices are higher this week.
• Although we’ve seen the first breaks in the high gluten basis all season, we are seeing near record high and climbing winter wheat basis levels.
• Rail shipments are badly delayed, keeping wheat from moving to market which is supportive to prices.
• Last week the USDA reported that they have raised their estimate for the world wheat crop to a record 616.9 million tons. This large supply and the excellent start to the U.S. 2005 winter wheat crop should limit the upside to futures prices.
• On a repetitive note, a break in prices would require more wheat to come to market.

Week Ending November 12^th,2004

• Wheat futures and flour prices are higher this week, while the basis has been steady.
• Mill demand is still heavy, but wheat movement hasn’t improved much.
• Flour buyers seem to be hoping for a break in basis pricing before covering their flour needs in the New Year.
• Steady progress is finally being made in this year’s fall harvest, but it is yet to be seen whether an end to the harvest will mean a pick up in wheat that will come to market.
• We expect flour prices to remain close to their current price levels for the near future.

Week Ending November 5^th,2004

• Wheat futures prices have drifted lower this week.
• Spring wheat basis levels have moved higher, resulting in higher spring wheat flour prices for many protein levels.
• Increasing demand faced with slow movement of wheat is supporting the basis leading to higher flour prices.
• Prospects for large, quality crops in Australia and Argentina are reinforcing the view that the world wheat supply will continue to be large.
• Wheat futures are likely to find little support with corn prices this low, but basis levels could remain historically high for some time.

Week Ending October 29^th,2004

• Wheat futures and flour prices are higher this week, basis levels remain historically high.
• Wheat movement to market continues to be slow. Farmers have sold some of their harvest into Government programs, and are still occupied with harvest as well as holding out for higher prices.
• Speculations about future export business are much discussed at this time, including the possibility that increased world freight costs could slow world wheat trade.
• The U.S. faces increased competition for export sales from Argentina, and Canada is expected to compete this season after all.
• Talk of decreased export sales could pressure futures prices lower, but we don’t look for a relief in the basis, which will keep flour prices from moving sharply lower.

Week Ending October 22^nd,2004

• Wheat futures eased slightly lower this week, but spring wheat basis levels remained historically strong at all protein levels.
• Wheat movement is still sluggish, which is supportive to prices.
• Reports of expanding world wheat stocks competed with projections for a smaller wheat carryover in the U.S. for the dominant market factor this week.
• Moderate price changes may be the rule in the market in the weeks to come.

Week Ending October 15^th,2004

• Wheat futures and flour prices were higher this week.
• Several supportive factors lead prices higher; slow pace of wheat movement, supportive U.S.D.A. data, and continued concerns over this season’s Canadian spring wheat crop.
• There are concerns that 20% or more of the Canadian crop is not milling grade wheat.
• U.S.D.A. supply and demand reports this week lowered the wheat carryover and increased export forecasts.
• Weak corn and soybean prices have not been able to pull wheat prices down with them so far.

Week Ending October 8^th,2004

• U.S.D.A.'s September 30th reports raised spring wheat production estimates, as better than projected yields more than offset weather related crop damage. This set the stage for the possibility of lower futures prices.
• Wheat futures and flour prices are a bit lower this week, in the case of flour prices the exception is high-gluten spring wheat flour.
• The low protein of the spring wheat that has been harvested caused premiums to rise to historic levels, and continues to support premiums at those levels.
• Export sales have slowed, taking some pressure from prices; exporters are having a difficult time securing the quality of wheat needed to compete on the world market.
• The market conditions we are seeing, slightly easing futures and firmly supported basis levels, could continue for the next few weeks.

Week Ending October 1^st,2004

• Wheat futures have moved slightly lower this week as the markets wait for today's wheat production reports from the USDA.
• Basis levels are higher as producers and railroads turn their full attention to the row crop harvest while wheat coming to market is not adequate.
• Harvest of this year's record corn crop is underway, yields are high. Corn futures have been setting contract lows almost daily.
• The spring wheat harvest is finally making good progress. Quality issues in Canada seem to be not as bad as was earlier thought.
• We may see lower wheat futures prices, but the direction the basis takes will determine whether our flour prices will be able to move lower. Relief for basis price is not expected until after the row crop harvest is complete.

Special Announcement September 24^th,2004

• Premium for Protein: Basis premiums for high protein wheat is the highest General Mills has seen since 1994. These accelerated premiums are a result of lower protein averages in this year's hard red spring wheat crop. The lower protein is due to the cool wet summer experienced in the spring wheat growing areas. Continued cool wet weather has created harvest delays pushing wheat prices higher as well as fueling quality concerns for the crop.
• Increased costs for the high protein wheat will result in increased costs for high gluten flours. Differentials, which have ranged between $1.25 and $2.00 for premium high gluten flours in the past are currently running between $3.00 and $4.00 with no high end clearly defined.

Week Ending September 24^th,2004

• Flour prices remain at the same high levels we were seeing at our last communication.
• Concerns over delays with the spring wheat harvest, and concerns over spring wheat quality reduced by rain are supportive factors.
• Higher prices have pulled some wheat into market, but there is much concern that the necessary quality wheat will not be easy to come by this year.
• Seeding of the new hard winter crop is well ahead of average. Soil moisture in most areas is very good.
• Developments over the next couple of weeks will help determine price direction. Key factors will be quality and quantity of wheat that is sold, ongoing reports of crop quality as harvest is completed, and upcoming U.S.D.A. report estimates.

Week Ending September 10^th,2004

• Wheat futures and flour prices continued to climb higher this week.
• Basis premiums for high protein wheat are the highest we’ve seen since 1994. These costs are resulting in higher prices for high gluten flours.
• Fears of frost damage lead to higher prices for row crops this week, but as revised forecasts eased those fears, prices began to fall back.
• Harvest delays continued, leading to higher spring wheat prices. Cold, wet weather could be reducing crop quality.
• Prices may continue to show strength unless we see a dramatic improvement in wheat moving to market.

Week Ending September 3^rd,2004

• Wheat futures and flour prices are sharply higher this week.
• Markets seem to feel that corn futures prices had reached their seasonal bottom.
• Weather and quality concerns, compounded by the effects of fund buying, are supporting prices.
• The basis premium paid for high protein wheat skyrocketed this week, due to concerns with this season's spring wheat crop, and slow movement to market of adequate proteins.
• Flour prices are working their way higher, which may continue at least for the near future.

Week Ending August 27^th,2004

• Wheat futures prices and flour prices are higher this week, though prices have shown some weakness in the past couple of days.
• Weather concerns fueled the recent price increase. Some frost has occurred in North Dakota and Canadian spring wheat belts, only minimal damage is expected.
• Recent rains could delay the spring wheat harvest and reduce quality. At this time, the harvest is behind average percentages completed.
• Export demand for U.S. Wheat is exceeding trade expectations, which is supportive to prices.
• Farmer selling has been limited, but may expand with prices having recently moved off of their lows.

Week Ending August 20^th,2004

• Wheat futures prices set new contract lows this week, reacting to the U.S.D.A.'s crop production reports that exceeded trade expectations.
• The large spring wheat crop and record soybean and corn crops were well known, but the U.S.D.A.'s new estimates were above what was expected.
• Farmer sales could increase in advance of the fall harvest, but at these prices it is anyone's guess how much farmers are likely to sell.
• Trade is expecting the U.S.D.A. to be forced to raise their export projections, as export sales have been strong. This move is expected to lead to higher wheat prices.
• Seasonal lows are likely to be nearby. Wheat can trend higher following August production reports.

Week Ending August 13^th,2004

• Wheat futures prices moved sharply lower this week.
• Anticipated record production of fall crops has delayed traditional seasonal lows we would expect to have seen by now.
• Estimates of world wheat production continue to grow.
• Wheat movement to market has been slow; farmers were unwilling to sell at these prices. Producers are also preoccupied with the harvest.
• As we write this, the market awaits U.S.D.A. production and supply/demand reports. Wheat estimates are expected to continue to expand.

Week Ending August 6^th,2004

• Wheat futures and flour prices are steady this week.
• Corn futures prices rebounded slightly.
• Egypt purchased soft red winter wheat, which was a supportive factor.
• Although the market's attention is drawn to news of a record corn crop to come and improving conditions of the spring wheat crop, prices this week were reluctant to move lower.
• Increase in supply could lead to lower prices as storage space is needed in the country, but we are near the time frame for seasonal market lows.

Week Ending July 30^th,2004

• Wheat futures prices dropped sharply this week, following corn lower.
• Corn prices continue to be weak in the face of a crop that could exceed the U.S.D.A.'s already record high estimate.
• Spring wheat crops in the U.S. and Canada are making good progress.
• Export pressure is on as favorable weather in other wheat growing countries continues to make good crops even better.
• Farmer selling has picked up even with prices eroding. Storage space could be a problem if the weather holds and crops continue to improve, which could keep pressure on wheat prices.

• Wheat futures and flour prices are lower this week.
• Corn prices have dropped sharply, pulling wheat prices with them.
• Lack of any significant new export business was a negative factor in the market as well, buyers are turning to other countries where prices are more favorable.
• Spring wheat conditions are very good, crop estimates continue to escalate.
• There is potential for a further break in prices over the next several weeks, but this opportunity could stall if low prices prevent farmers from selling.

Week Ending July 16^th,2004

• Wheat futures and flour prices are higher since our last report. Wheat markets moved lower more than one day this week, but prices bounced back the next day.
• Wheat prices seemed to be following corn prices, which also see-sawed this week.
• U.S.D.A. supply and demand reports lowered the U.S. winter wheat forecast more than expected, which has been a supportive factor for prices.
• Farmer selling is expanding.
• Factors are currently limiting the decline in wheat prices. We may need to watch the corn futures market to get an idea which way wheat prices are heading.

• Wheat futures prices are higher this week due in part to concern over quality of the winter wheat harvest.
• Hard and soft red winter wheat are seeing instances of moisture-related problems. Rain during harvest has caused many problems in fields in Kansas and Nebraska, which will lead to a smaller harvest.
• Railroads are badly behind in placing cars and completing shipments, much as they were last year at this time. This impediment to wheat movement is suppor