Alaron Grains and Oilseeds Comment

CHICAGO - Nov 3/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn- Our Thursday weekly export sales report showed 1.027 m.m.t. of corn was sold last week off 2% from the week prior and 5% under our four week average. it is a very good number considering our lofty prices. After month end profit taking Monday and Tuesday by our large equity funds, they turned back in Wednesday and Thursday buying long again and pushing corn to new contract highs. Corn buying continues as fear in the corn pit is that soaring soybean prices will keep bean acres unchanged this spring, while corn is in search of a price that insures growers will plant 4 million acres more that are needed as demand continues to outstrip supplies. Crop rotation alone will bring more corn to seed this year but equity funds trade trends with their big money and not agricultural logic. This means overbought is the norm. It is not unthinkable that 4.00 plus May futures being seen before Jan. 1. With near term volality creating great day today profit stay tuned to the near term bar chart trends. If forced to project markets into next year, I think large equity funds will take grains to new highs yet, then a big grain break in the Jan., Feb. time frame. As equity funds pull out of grains and begin to re-position funds back in crude oil, unleaded gas futures, gold and silver into August. They will begin buying some grains long in May for the summer growing season. What is up for next week? The USDA monthly crop report comes out Thursday at 7:30a central time with most thinking the government will lower corn production and ending stocks further lending to higher futures ahead of its release. Buy Dec. corn futures long and a 3.45 Dec. put for downside protections and beware this bull market can die suddenly if funds turn off their buying.

Wheat- Thursday's weekly export sales report showed 938 t.m.t. of wheat was sold last week, double the week prior and 91% over our four week average. No surprise here as we knew last week's sale of 400 t.m.t. to Iraq would be on the list but sales are sales and though we will not see Iraq in again soon, we have to assume demand in the big picture remains weak yet any business on our historically low inventory is going to push prices higher. On the crop scene, our winter wheat crop is off to a great start with conditions up 3% on the week and more rain called for. Wheat has scene the large trading funds getting out of longs by selling rallies the last three weeks. We need a close over 5.20 basis Dec. futures to turn bullish on the charts but fundamentals still point strong as next week's crop report is expected to further cut US and world ending stocks. There seems to be plenty of outside buying on breaks slowing any all out collapse in prices but bulls must be concerned over the lack of big fund buying. Failure to take out 5.20 next week even if as a follower to corn and beans could mean a break to 4.60.

Bean- Thursday's weekly export sales report showed 640 t.m.t. of beans were sold last week up 3% from the week prior and 32% under our four week average. Key player China, was in for 335 t.m.t. versus 297 the week prior. Like corn, when you consider our over the high cash bids, demand is strong. Beans came into the week with equity funds long about 26 thousand contracts a very small position compared to their corn and wheat position but they took some light profits out the last day of Oct. Tuesday before piling back in Wed. and Thurs., with more light buying today. Beans have become the rabbit that maintains the lead at the dog track. Corn and wheat continue to chase beans in hope of catching it and having the trade begin talking about bean acres going to corn and wheat as is badly needed. The large equity funds ignore the bearish supply side harvest inventory and continue to use beans as a home for their large trading that also continue to draw monies to support their long corn and wheat. Like corn, trade the beans day by day and avoid long term thinking. Next Thursday's crop report is expected to show an increase in production and possible ending stocks but be careful a production increase does not automatically mean lower carry over stocks as demand for beans remain robust. Longs find support on Jan. futures at 6.58 then 6.45. Consider the Jan. 6.50 put for 20 cents cost and downside insurance.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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