Alaron Grains and Oilseeds Comment

CHICAGO - Sep 6/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn- We started the week's reports with Tuesday's weekly export inspection report showing 43.2 million bushels of corn was inspected for near term export off 1 m.b. from the previous week but a whopping 27 m.b. over a year ago. Year to date inspections are 2.064 b.b. versus 1.716 m.b. a year ago. Clearly a sign of a bullish demand scenario continuing to build, as harvest closes in and demand to fill ethanol warehouses looks to be the highlight. Our crop condition report shoed 59% of the crop is in good to excellent condition up 2% from the week prior and 8% over a year ago. The trade had expected it unchanged. 20% is fully mature and ready for harvest. The growing season is over and all eyes turn to next Tuesday's USDA crop report and just how big is the crop? Private forecasters are coming in from 100 m.b. lower to 80 m.b. higher. A industry poll comes out tomorrow. There should not by any real jump in production either way and if there is a surprise it will come on carry over stocks for next year coming in lower than expected. It maybe too early for the government to project ethanol plant purchases of cash corn. It may take until harvest is three-quarters complete to see their intension. I still believe there is still a better chance of new lows below 2.34 basis December futures to come. Once our beginning harvest lows are in, we will attack late spring futures long and options.

Bean- Our weekly export inspection report showed 10.8 m.b. of beans were inspected for near term export down 2 m.b. from the week prior but 8 m.b. over a year ago. Year to date inspections are 933 m.b. versus 1.070 b.b. a year ago. It is our fifth consecutive week of inspections over a year ago and a sign of improving demand but most of the positive demand is offset by talk of a bigger bean crop. Trade estimates are all coming in larger for next Tuesday USDA crop report. The crop condition report showed 59% of the crop is in good to excellent condition, unchanged from the week prior and 5% over a year ago. 13% of the crop is dropping its leaves the last phase before harvest. Like corn, beans too are set up for one more beginning harvest break before the season's low is in. I look for demand to push much stronger as October enters and China becomes a US buyer for near to long term shipments. Thinking Brazil's plantings will be down this year and they will find less South American beans next spring to buy at value as Brazil's average price looks to racket up. No bull market as large carry over stocks exist here, but a decent short covering and buying bounce off a harvest supply side low.

Wheat- Tuesday's weekly export inspection report came in showing 18.7 m.b. were inspected for near term export up from 16.2 the week prior but under a year ago of 20.7. Year to date inspections beginning June 1 are 208 m.b. versus 237 a year ago. Though demand remains historically soft it is slowly creeping up and may soon exceed last year's weak numbers. Wheat's strength remains solely off issues outside the US. Export competitor to the US Australia continues to see production fall due to drought. French wheat prices look better and India keeps sending up smoke signals. They are going to be big buyers on the world market for the first time in over 5 years, while world stocks continue to decline. This all has large equity funds buying while weak under-margined shorts in the market bail out. Small specs have been heavily short. The recent 40 cent rally after our August 43 cent break has us wondering how demand will surface at US ports while with September wheat over 4.00 when we could not sell it at 3.60. It is still more probable than not only lower prices will bring demand as the market function is too ration the crop. High prices abate demand, low prices brings demand. The key to the rally is more of a function of large equity trading funds, trading issues outside of demand and that being foreign port production problems and the potential of lowing world ending stocks even if purchases take place on competitor ports. 4.16 is near term support on December futures.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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