Alaron Grains and Oilseeds Comment

CHICAGO - Dec 15/06 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn- Thursday's weekly export sales report showed 1.4 m.m.t. of corn was sold last week up 72% from the week prior 31% over our four week average and well over a year ago of 920 t.m.t. Asian sales were decent at 370 t.m.t. but should have been better c considering the high number. It is a positive demand indicator as expected on last week lower prices being off 33 cents from the high the week prior. Our generally lower average four week price this week sets us up for strong export numbers next Thursday as well. We have heard this week that Asian buying was good. Since Nov. 27th, we have seen a willingness of large traders to take profits or sell strength as year end book balancing continues. The long term bullish supply demand fundamentals remain. Demand will continue to outstrip current production inventory while new crop 2007 inventory will not be addressed until late March when the USDA releases its planted acreage intension report. In the meantime wild private crop estimates will come out from time to time all suggesting the obvious that more corn acres will go to seed. One analyst estimate Thursday suggested an increase of 7.3 million acres more will be planted versus our 2006 acreage of 79.3 m.a. There will be others from as little as 3.7 m.a. to 9 m.a. We are certain to pull 2 m.a. from the conservation program as at least 2 m.a. are in that should not be and another 3.5 from soy bean acres planted in 2006 switch to corn by way of normal crop rotation. Anything over that has to come from spring wheat or oat acres. Land out of conservation reserve is next to impossible to pull out as the political groups who got the acres in gave up other concessions in achieving their conservation goals and the other side is unlikely to concede unless it is a national emergency such as running out of corn and we are not there yet. But expect planted acres suggestions for corn to be generally high as the psychological need is great but come the late March report the actual number will be at the low end or under expectations. There is still room next week for more long liquidation ahead of our Christmas closing but monthly lows will be in by Dec. 22nd as after Christmas we look short covering and buying into what could be a very bullish supply side USDA. January crop report. March corn needs a close over 3.78 to turn chart bullish with 6.58 a reasonable low expectation next week. The January 3.70 put is about 4 cents or $200. with the 3.70 call 3.5 cents. They expire Dec. 22nd. A cheap way to approach next week.

Bean- Thursday's weekly export sales report showed 903 t.m.t. of beans were sold last week up 35% from the week prior, 22% over our four week average and almost double last year's 500 t.m.t. Key world player China was in for 469 t.m.t. versus 126 the week prior when contract highs were hit. It is a solid demand indicator but does suggest that 6.80 or higher bases January has importers backing away. Thursday also brought us the national oil seed processors association crush report for Nov. showing 148 million bushels were crushed to get the soy meal and soy oil, down 6.7 m.b. from the Oct. report with soy oil stocks rising from 2.638 billion pounds to 2.694. It is normal to see crushing plant declines in Dec. as shut downs for cleaning take place but less crushed usually lends to lower soy oil inventories not higher but we saw a lead to this on the Dec. 12 USDA monthly crop report when they raised soy oil ending stocks on the month as well as world ending stocks. It is clear that while corn to ethanol production remains strong, the soy oil to bio-diesel fuel has taken a step back. Beans like corn, are set up for potentially more long liquidation into the holidays. We look to at least test support of 6.50 on the downside with 6.42 as worst case scenario before year's end with 6.73 as upside risk resistance. Beans too look to then strengthen into our Jan. crop report which is the final 2006 crop production report.

Wheat- Thursday's weekly export sales report showed 471 t.m.t. of wheat was sold last week up 17% from the week prior, 15% over our weak 712 t.m.t. Not a good demand signal after a 30 plus cent decline from the week prior. Wheat's a sad story. Crops here and abroad are going dormant, while supplies of high protein milling wheat for export are tight leaving demand to other foreign ports. March wheat finds minor support at 4.80 Monday then 4.72 with upside resistance up at 5.10. A close over 5.10 is needed to turn chart bullish. A close under 4.72 has us starting at long term support of 4.50. Though near term fundamentals remain negative for pricing, long term situations on supply remain very questionable. Australia's drought continues as they contemplate 2007 plantings. China and the US see their winter wheat crops going dormant in poor shape do to drought conditions, while marginal world wheat exporters who suffered tight production in 2006 plan to hold back exports in 2007 to help replenish domestic stocks and control price inflation. All this sets up a potentially explosive upside market for 2007 if any production problems arise.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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