Alaron Grains and Oilseeds Comment

CHICAGO - Dec 12/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn- Two reports Monday starting with our weekly export inspection report showing 40.2 million bushels of corn was inspected for near term export. This was down from 45.7 the week prior but over a year ago of 37 m.b. year to date inspections are 608 m.b. versus 498 a year ago. It is a neutral to friendly demand signal on the week. Pre-opening Monday brought us our monthly USDA crop report. Note, there was no update on corn and bean 2006 production numbers as the final crop number comes out on the January report. Today's report gave us our carry over stocks or ending stocks that are expected to be left over come the start of our new harvest and marketing year Seto. 1, 2007. In effect it is our savings account for grain as its number is derived from total production from 2006 minus demand from feed use, exports and consumption for ethanol. Our Sept. 1, 2006 ending stocks were put at 1.970 billion bushels but our Sept. 1, 2007 ending stocks number was pegged at 935 million bushels, the fourth lowest ending stocks inventory since 1975. This was unchanged from the month prior and only 2 m.b. under pre-report trade guesses. World ending stocks were 92.7 m.m.t. versus 90 the month prior and 125 this past year. No surprises here as there was no production numbers for the USDA to spin off of so we expected only a minimal adjustment. After a lower open range Monday, March corn settled higher in sympathy with higher bean trade and had us close over support of 3.66 after putting a low in under it. It is going to be hard to rally into our Christmas holiday as the market will have to chew on old bullish news as no fresh fundamental supply side new can come until that Jan. crop report. If a test of our old highs are going to occur it will come as demand continues strong especially sales to Asia allowing chart resistance to be broken. If normal seasonal occur the pattern we saw of large funds taking profits off strength the last week of Nov. Also the first week of Dec. will continue allowing us to take out support. We need a close under 3.68 basis March first. Then a test of 3.58 will occur, with worst case downside scenario being 3.34 area but a close over 3.78 sets us up to test contract highs. We will lean on charts heavily into Christmas. consider the Jan. serial option that expires Dec. 22nd. The 3.70 put is 4 to 5 cents or $250. or less. It is a low risk way to approach the downside, while the 3.75 call is about 4 cents and addresses your downside risk. You can do both for 9 cents cost and risk and play both sides for the next 8 days for the cost of risk a futures brings everyday. Just a thought for the marginal trader.

Bean- Monday's weekly export inspection report showed 35.3 m.b. of beans were inspected for near term export up slightly from the week prior of 34.8 and well over a year ago of 16.8. Year to date inspections are 412 m.b. versus 337 a year ago. It is a good demand signal after prices last week fell 30 cents from the week prior contract highs. Monday's USDA crop report put our Sept. 1, 2006 ending stocks at 449 million bushels and our Sept. 1, 2007 at 565 m.b. the highest on record. This was unchanged from the month prior and only 1 m.b. under our average pre-report trade guesses. World ending stocks were 55.72 m.m.t. versus 55.22 last month. They raised soy oil stocks for the U.S. to 2.729 billion pounds versus 2.688 last month with world stocks up just a bit but while U.S. soy meal stocks were left unchanged from the month prior, world ending stocks took a sizable drop. This meal stocks decline on world numbers led to a early mission rally on meal Monday. We need a close over 6.75 to turn near term chart bullish and terst our contract highs, but a close under 6.50 would be disastrous with a quick test of 6.42 and possibly 6.28 before it is done. consider the Jan. 6.60 put for 7 cents or $350. and the 6.70 call for 5 cents or $250. Like corn, this option too expires on Dec. 22nd and gives ample time to profit from a break either way.

Wheat- Monday's weekly export inspection report showed 18.2 mb. were inspected for near term export off from 20.3 the week prior and under a year ago of 27.6. Year to date inspections are 440 m.b. versus 542 a year ago. After falling 35 cents last week demand turned even weaker. Monday's USDA crop report showed 438 m.b. will be left over at the start of the new wheat marketing year June 1, 2007 up 20 m.b. from our last report but well under this past June 1 of 571 m.b. World ending stocks rose 2 m.m.t. from last month but well under this last year's 147.3 m.m.t. It should be viewed as a neutral supply side report at best as most eyes now are on new crop plantings and 2007 production prospects. Wheat continues to be the weak grain market as it lacks the demand to drive it that corn and beans have, while US and world wheat growers continue to plant more 2007 acres and or are going dormant for winter not allowing us to price in supply side issues. Next support is 4.72 for March then 4.54. We need a close over 4.90 to turn chart bullish.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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