Alaron Grains and Oilseeds Comment

CHICAGO - Nov 10/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn- Thursday's weekly export sales report showed 1.929 m.m.t. of corn was sold last week up 88% from the week prior, 85% over our four week average, over a year ago of 884 t.m.t. and the highest weekly sales number in over 5 years. The key here is demand increased on contract high prices telling you panic buying is setting in. Users of corn fear if they do not b buy here at the 3.50 area it could be a dollar higher next month. Importers are buying all they can for future delivery knowing it is either very cheap compared to where it is going or prices will drop and they will just cancel the shipments. To make things worse our USDA report Thursday said as demand is rising production and supplies are shrinking. The report put corn production at 10.745 b.b. down 160 m.b. from our October report, 367 m.b. under last year and 93 m.b. below the average pre-report trade guess. Carry over or ending stocks were put at 935 m.b. down 61 m.b. from October and 1.036 b.b. under this year. Profit taking from over bought conditions is ever present but if we are going to stop the over consumption leading to dwindling supplies our front month contracts will need to go high enough to cut off export business and slow domestic feed use. After corn closed higher the three day prior to the report in anticipation of a bullish report we saw only 3 cent gains off the report opening before those fat with profits took their rewards posting 8 cent losses late and follow through profit taking early Friday. So how does next week set up? If the report is right, then prices will move higher by week's end. There is at least one negative influence that could bring on further selling and that long awaited 25 to 35% correction of the recent big monthly move and that being this week's crop production report is the last of the year. December's USDA crop report will cover carry over or ending stocks but no crop production numbers and without crop production, ending stocks should not change. The next crop production report is the crop season's final one in January. It is surely to show lower production and ending stocks as the lowest yielding corn states have yet to bring their crop to harvest in the east. In the meantime we will watch to see if funds back away until then as no bullish production news lie ahead. If December closes under 3.40 next stop is 3.20 which I would be in buying very aggressively. A close under 3.20 negates the technical side of the bull market.

Bean- Thursday's weekly export sales report showed 768 t.m.t. of beans were sold last week versus 640 the week prior. China was in for 230 t.m.t. versus 297 and 330 the two prior weeks. it is a positive demand signal especially after last week's contract highs but we are starting slow a little. If bean demand finally fades this could have futures abate quickly, especially with our large crop and inventory but that is yet to occur. The USDA crop report put bean production at 3.204 b.b. up 51 m.b. from our October report, 177 m.b. over a year ago but 36 m.b. under our pre-report average guess. Carry over or ending stocks for 2007 we are put at a record 565 m.b. up 10 m.b. from the month prior but 18 under pre-report estimates. The report was bearish but not as bearish as expected. We opened 3 cents higher and chopped up and down in a narrow range before closing off 8 cents and lower on Friday's open. Beans, like corn see the overall picture as price bullish but potential for a bigger near term price correction. January support is 6.40 next week. If we pull back to that area, I will be buying or on a close early week over 6.76. Without any fresh fundamental news coming near term we turn to charts aggressively.

Wheat- Thursday's weekly export sales report showed 572 t.m.t. of wheat was sold last week down 39% from the week prior and 9% below our four week average. More of the same we have seen weekly as weak demand gets weaker as prices remain too high. The USDA crop report only had carry over stocks numbers which were unchanged at 418 m.b. and 150 below last year and 8 m.b. under pre-report estimates. World ending stocks were 118 m.m.t. versus 119 last month and 147 a year ago and 25 year low. Wheat opened higher on the report before profit taking pulled it down 14 cents on the close and further declines early Friday. With our winter wheat crop going dormant by month's end and in decent shape to date and no real hope of demand increasing we can not expect any supply side bullish news until the crop breaks dormancy in March and demand side bullish news until our late May and June harvest and that is only if the crop is suitable for export. This leaves wheat in more of a followers roll to corn and beans and on its own a weakened state. A close under 4.78 basis December futures and 4.60 is next stop. We need a close over 5.02 to turn bullish. On a pull back of the July KC wheat futures contract, I will buy my first long KC July, short May MN futures spread. Look for the hard red winter wheat crop futures in KC to gain over our MN exchange spring wheat futures.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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