Because of strong overseas demand, the U.S. Department of Agriculture (USDA) did increase its 2007/'08 export projections for wheat and soybeans on its February U.S. supply/demand revisions-as many in the trade were expecting. However, it did not raise its foreign old-crop corn demand this month.

In wheat, the U.S. 2006/'07 ending stocks were dropped 20 million bu. to 272 million bu.-as this year's exports were raised 25 million while feed usage was cut 5 million. As anticipated, spring wheat's sales were upped 20 million along with a 5 million rise in soft red exports. The USDA also reduced its world ending stocks by 1.2 mmt to 109.7 mmt because of stronger disappearance.

However, the biggest news was made by the U.S. exchanges late Friday, when revised daily price limits were announced because of spring wheat's inability to trade freely due to limit-up moves last week. With the U.S. Commodity Futures Trading Commission approval, wheat's daily price limit at all three exchanges is now 60 cents. This crop's limits expand 50% (90 cents) the next day if two contracts remain at limit up or down at that exchange; limits will expand another 50% ($1.35) if two contracts remain at limit on the second day. The expanded limits will be open for three days before reverting back 60 cents, once that exchange's wheat price isn't limit on the close. High option values, strong speculative interest and the inability to lift hedges to facilitate cash trading led to this move by the exchanges.

U.S. soybean demand also rose on USDA's latest update, with this year's exports up 10 million to 1.005 billion and our domestic crush increased by 5 million to 1.835 billion. This resulted in this year's U.S. ending stocks falling to 160 million bu.-the lowest level since the 112 million in 2003/'04. However, South America's upcoming harvest (Brazil and Argentina left unchanged) and the USDA's first 2008/'09 economic forecast of acreage at its Ag Forum on February 21-22 will likely be the market's focus the next few weeks.

Somewhat surprisingly, the USDA didn't increase its export forecast this month. Despite sales being sharply ahead of the needed pace, the USDA seems to be anticipating a downward revision to its U.S. domestic demand from feed or ethanol because of current high prices in the coming months. This could leave this year's ending stocks near current levels, so it didn't want to cut this month. This development may occur, but the market was left a bit confused ahead of the USDA's Ag Forum 2008 acreage levels-which will be the next focus.

Because of market uncertainties, producers should have old-crop corn and soybean sales at 90% and 2008/'09 row crop marketings at 45%-50%--with wheat at 50%-60%. Price vulnerabilities are $.50-$.70 in corn, $1.50-$1.80 in beans and $2-$3 in wheat if investment support exits the CBOT ahead of USDA's Ag Forum 2008/09 projections.