Alaron Grains and Oilseeds Comment

CHICAGO - Aug 11/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn- Thursday's weekly export sales report showed 1.162 million metric tons of corn was sold last week, up 29% from the week prior and 66% over our four week average. Asian sales were 800 t.m.t. versus 360 the week prior. Asian sales look to continue strong into year's end keeping US export demand over a year ago as China holds back corn sales to surrounding Asian neighbors and use that corn to expand their ethanol production that is expected to jump 6 times its current consumption by 2008 leaving the US to fill the hole in sales they leave. Friday's USDA monthly crop production report pegged corn production at 10.976 b.b. This was 181 m.b. over pre-report trade estimates and 236 m.b. over the July report and only 136 m.b. under last year's record crop. They put yields at 152.2 b.p.a. This crop production estimate is as of August 1 or based on what they think July weather did to crops in august. the September report is more important, then the October as close to final numbers you can expect. So, this report the market shrugged off quickly as production number are sure to change and quickly went to trading weather. Our carry over stocks for the start of the new marketing year September 1, 2007 were put at 1.232 b.b. versus 2.062 this year. This lower carry over will be important long term after we find our growing season low as a strong demand now ill get stronger on lower prices. After the 7 cent lower open we pushed to down 12 at midsession which was more from pent up selling pressure ahead of the report on all the rain in the Midwest. Wxrisk.com sees more rain across the western corn belt Sunday to Tuesday. This should give us a lower open and close Monday with a lower open Tuesday pricing in what should be a bearish crop condition report Monday after the close. I look for this week's rain to show corn improved 3 to 5% in the G-E category. Shorts should take near term profits of a Monday or Tuesday low and look for some short covering.

Bean- Thursday's weekly export sales report showed 274 t.m.t. of beans were sold last week up 55% from the week prior and 18% over our four week average. Still too low a number to be considered good demand. Key world player China was in for 57 t.m.t. and a surprise 226 t.m.t. buy Thursday that will show up on next week's report so, that at least brings hope that demand simmers under the shadow a record ending inventory. Friday's USDA crop report put bean production estimate at 2.928 b.b., under pre-report guesses by 92 m.b. and below our July report 82 m.b. and 158 m.b. under last year's record crop because it was not as bearish as pre-report trade guesses we opened up 3 to 4 cents but they quickly moved to weather and its impact on beans and pushed to down 7 by midsession as this last five days brought us our best week's moisture of our growing season. Carry over stocks for September 1, 2007 came in at 450 m.b. down 110 m.b. from last month, 30 m.b. under this year but the second highest in 21 years. Like corn, beans too are set up for more rain Sunday to Tuesday and lower trade Monday and possibly Tuesday after Monday's 3:00p crop condition report should show a 3 to 5% increase in quality ratings. Then short covering. Like corn, beans too see huge production to date and with a wet start to August, setting us up to bigger numbers on September's report. Ignore all comparisons to pre-report trade guesses.

Wheat- Thursday's weekly export sales report came in at 395 t.m.t. down 32% from the previous week and equal a weak four week average. 150 t.m.t. went to Asian markets buying low quality feed wheat. In part, last week's short covering rally had higher prices chase away importers while expectations for further cash harvest weakness had others sitting on their hands. Friday's USDA crop production report put all wheat production at 1.801 b.b. down 304 m.b. from last year. All winter wheat at 1.283 b.b. versus 1.499. spring wheat production at 463 m.b. versus 504 last year but it was 35 m.b. over pre-report trade guesses. Carry over for wheat's new marketing year June 1, 2007 came in at 434 m.b. versus 568 m.b. this past June 1. Ok, we all new fro some time about declining production, this is why KC wheat futures went to 9 year highs with CBT and MN futures in tow but the growing season is over until mid-September when our winter crop goes to seed in the western plains. Our 2006 past growing season lows will be in before September 15th. Expect further pressure from the remaining spring wheat harvest and generally weak demand. Because our winter and spring wheat crops suffered through drought there is very little high protein milling wheat around for export. This leaves the US as a third or fourth port of origin to turn to for milling wheat. What high protein wheat that is around is being held tightly in growers hands for higher cash bids to be paid by private milling concerns here in the US while our lower quality wheat sees lower cash bids to find its way into the Asian feed market where quantity is more important than quality. Demand will remain soft as we simply do not have the high quality that millers overseas need for human food production. Where corn is grown primarily for animal feed leaving quantity more important than quality and quantity determining its value on demand, wheat is grown for human consumption leaving quality more important to pricing value than quantity. After we find our post growing season low before September 15th we will go long on one major theme. that is, the smaller winter crop to go to seed this fall as drought in key producing states TX. OPK, et. looks to cut acres appreciably at a time when inventories are extremely low. I expect a good late fall corn and wheat rally but calling our post growing season low is critical. If you do not have an existing account at Alaron and would like to use me as your broker call me at 800 563 9510. Or email me at thannagan@alaron.com.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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