Alaron Grains and Oilseeds Comment

CHICAGO - Oct 13/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn- Thursday's USDA monthly crop report dealt a real surprise to an already bullish market by pegging production at 10.905 b.b. 239m.b. under our average pre-report trade guess, 209 m.b. below our Sept. report and 207 m.b. below last year. This led to our ending stocks come Sept. 1, 2007 being lowered to 996 m.b. off 224 m.b. from our Sept. report. This is the fifth lowest ending inventory in 31 years not to mention world ending stocks put at a record low 89.5 m.m.t. It makes corn under valued even at these prices. Corn has two missions into early spring. One, to find a price high enough to ration the crop or to discourage over usage so we do not run out. Two, to stay high enough to encourage farmers to plant at least 3 million more acres come spring. Friday's weekly export sales report showed 1.286 m.m.t. of corn was sold last week up 11% from the week prior and 40% over our four week average. Asian markets came back after their week long holiday for 1 m.m.t. even after higher prices. All the underlying fundamentals remain strong but caution, as we are up over 40 cents this month and over 70 cents higher since our lows 10 weeks ago. This leaving room for a 25 to 30% correction on profit taking before month end. It may take wheat's bubble to break to start funds profit taking.

Bean- Thursday's USDA crop report pegged bean production at 3.189 b.b. up 96 m.m. from our Sept. report. 103 m.b. over a year ago but 24 m.b. under our average pre-report trade guess. They put ending stocks for Sept. 1 2007 at 555 m.b. up 25 m.b. from last month and the largest ending stocks inventory in history as well as upping world ending stocks to 55 m.m.t. Versus 51 last year. certainly there is no shortage of beans but all the numbers were less bearish that anticipated and the Nov. 5.38 futures low more than prices it in. We are seeing shorts in the market buying out as harvest is probably over 50% complete by Sunday leaving supping side bearish issues going to the sideline while strong demand fundamentals continue to strengthen. Friday's weekly export sales report showed 1.086 m.m.t. of beans were sold last week off 9% from a bullish number the week prior and 22% over our four week average with China in for 500 t.m.t A fat crop appears to be fully digested leaving demand and talk of bean acres next spring going to corn should continue to keep shorts bailing out. I stated last Friday a close over 5.70 basis November futures would take us to 5.94 to fill a gap. They closed over 5.70 Monday and hit 5.93 just after today's open. Support lies all the way back to 5.75 and if we close over the 5.94 resistance next stop is 6.02 then 6.14. Watch out for a month end correction.

Wheat- No production numbers for wheat as we had those Sept. 29 but we did get supply figures. They put US ending stocks come June 1, 2007 at 418 m.b. down 11 m.b. from our Sept. report and 150 m.b. under last year. World ending stocks came in at 119 m.m.t. versus 147 last year with Australia's crop at 11 m.m.t. versus 24.5 last year. The European Union 117 m.m.t. versus 122. it is pretty much what we know and that the world is running out of wheat. We have now rallied 90 cents this month on the Dec. CBT contract and 1.50 since our Aug. low. Funds have made a lot of money and may take profits before month end. A lot of the news that has fueled the rally is ending. The drought in Argentina is over as well as ample rain falling in Brazil. Australia probably will come out with one more report drawing down production giving us a big up day but harvest begins about now and the worst of their situation is behind us and the US winter crop is off to its best early emergence in 3 years. A bull needs to be fed every day and news for the bull could be running out. Option players can play both sides. Bulls, buy the Dec. 5.30 call and sell the 5.70 call for 14 cents or $700., and 40 cents profit potential. Bears, buy the 5.20 put and sell the 4.90 for 11 cents or $550. and 30 cents profit potential. In a bull market sky is the limit but a price correction sees Dec. wheat with potential of pulling back to 4.65 support.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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