Alaron Grains and Oilseeds Comment

CHICAGO - Dec 8/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn- Thursday's weekly export sales report showed 812 t.m.t. of corn was sold last week down 20% from the week prior. 40% under a strong four week average and over a year ago of 648 t.m.t. Asian sales were 470 t.m.t. versus 350 the week prior. The number is not bullish but not bearish either. It is neutral to friendly on demand for the week. Demand overall should remain good as ethanol plants continue to come on line from construction and in need of corn product as well as more feed use for cattle over our winter to maintain weights. With planting and growing of our new crop almost 5 months away demand remains a main pricing influence with technical chart patterns being 70% of our pricing influence and supply demand fundamentals 30% of our pricing influence. Funds took some of their record long futures positions and sold Monday and Wednesday but laid back late week waiting for Monday's 7:30a central time USDA crop report before taking further year end profits. Monday's report will not have an update on our 2006 corn crop production. That report comes out on our January report but we will have a carry over stocks or ending inventory for 2007 numbers and that has been very important to traders as the last two months have shown lower carry over expected due to smaller yields and extraordinary demand outstripping supply. Without a production update we can not expect a big change either way as only demand updates can change it on this report. Last month's report put ending stocks of corn for the start or our new marketing year and harvest Sept. 1, 2007 at 935 m.b. versus 1.971 b.b. our last crop year. Obviously anything under the month prior and we will open higher and over lower, but after the initial reaction we should expect more year end profit taking on the week. Before we see another run up into the January report which maybe the most bullish of the year as low yielding eastern corn belt state crops will show up on the report. We could see a cut in final production from our November report of 150 m.b. or more and they will subtract that right from our carry over. Failure to give us a surprise bullish report Monday we could quickly see 3.64 support on March taken out.

Bean- Thursday's weekly export sales report showed 667 t.m.t. of beans were sold last week off 9% from the week prior, 11% under our four week average and slightly under our 995 a year ago. China the key world player bought 126 t.m.t. versus 350 the week prior. clearly last weeks' contract high prices seen, attributed to importers backing away. It is a slightly negative demand signal on the week. Funds were heavy sellers Monday and Wednesday but late week the year end profit taking moderated as funds awaited the release of Monday's USDA crop report out ahead of the opening. Without any bullish surprise, we should expect selling early week to push us through our January 6.50 support price and a test of next support of 6.42. A bullish surprise could take January back to fill a chart gap at 6.74. Last month's report put our carry over stocks for 2007 at a record 565 m.b. Most expect that without a production number change until our January USDA report that a big change from last month's report will not happen. It could be from 15 m.b. lower, if bio-diesel demand takes the usage lead to 10 m.b. higher if the government continues its thinking from last month where late maturing crops saw good rains.

Wheat- Thursday's weekly export sales report showed 403 t.m.t. of wheat was sold last week 26% under the week prior, 11% under a weak four week average and just under last year's weak 451 t.m.t. Nor surprise here, as unless we gain a political sale to Iraq or long term oil friend Egypt throws us a bone we have to expect sales to be bearish. Tight milling stocks inventory off our poor winter and spring wheat crops leaves us as a third or fourth port of origin to turn to for wheat until our new crop comes in late next May and June. Additionally, our currently planted winter wheat crop is now dormant and government crop condition rating to give us yield and quality direction will not begin again until early April about 3 weeks after dormancy breaks in the western plains. so if anything is going to turn our domestic market bullish again before spring growing concerns it will have to come from growing problems on foreign ports. I will go to the weather site wxrisk.com to watch the continued drought in Australia before their new crop planting begins as well as South American crops now growing and China. These are key areas to watch as China's crop determines their reliability to supply surrounding Asian neighbors with wheat and of course Australia is a key world exporter. The entire US commodity industry has been bullish on wheat demand since mid-summer. The USDA reports have over estimated demand, only we here at Alaron explained on our reports weekly since August why demand would be weak and run under the year prior. We have been right on. All rallies came from supply news not demand. Demand influence to determine a trend change up can not happen until late spring now so stay focused on supply fundamentals. I have been consistent for weeks on this report that any strength in wheat prices would have to come from gains in corn and beans and we saw that as wheat remains basically a bear market as demand remains weak and supply side bullish news is on hold as most big producers are seeing their winter crops go dormant or they have not planted yet. Monday's report should show little change in last month's carry over number of 418 m.b. but the trade will look at the world carry over of 118 m.m.t. a 25 year low for any change. Near term CBT March wheat needs a close over 5.00 to turn chart friendly but a close under 4.86 then 4.72 is next stop. March KC futures need a close over 5.20 to turn chart friendly yet a close under 5.10 sets up up for potentially a test of major support at 4.88. Minneapolis spring wheat March have resistance up at 5.10 with support at 4.90 then major support 4.70.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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