Alaron Grains and Oilseeds Comment

CHICAGO - Jan 11/07 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Monday's weekly export inspection report showed 22 million bushels of corn was inspected for near term export down from 38 the week prior and under a year ago of 30. Year to date inspections are 755 m.b. versus 638 a year ago. No concern that demand is slowing as demand the week of a major monthly crop report, such as we have Friday always sees importers backing away until the report numbers give them insight into supply side issues for marketing. Put this aside though, as all eyes are on Friday's 7:30a central time USDA monthly crop report. This is a big report as it gives us our final crop production number for 2006. The last production estimate was on our Nov. 9th monthly crop report. So it has been two months and big changes may occur. In Nov. the USDA put our 2006 corn production at 10.745 billion bushels down from 11.112 in 2005. Pre-report trade estimates look for 10.706 or about 39 m.b. less. Corn on hand as of Jan. 1st or quarterly stocks are put at 9.107 b.b. and carry over or our ending stocks come the start of our new marketing year and harvest Sept. 1, 2007 at 893 m.b. off 42 m.b. from Nov. and well under our 2006 ending stocks of 1.971 b.b. If these numbers are realized then the report would be viewed as friendly but not bullish. We need carry over to come in 150 to 200 m.b. by way of production cuts or demand to be bullish near term. With the news this week large index trading funds were holding a much larger long position than the trade had thought, sets corn up to move lower next week unless the report is surprisingly bullish. I still think that the conservative trader should buy either or both a 5 cent out of the money put and call on the Feb. option. Then use the intelligence of the report for longer term trading while the option takes care of near term.

BEAN:

Monday's weekly export inspection report showed 12 m.b. of beans were inspected for near term export, down from 20.9 the week prior and a year ago. Year to date inspections are 504 m.b. versus 417 a year ago. Like corn, beans too see pre-report weakness in demand ahead of Friday's USDA crop report. Looking ahead to Friday's crop report. The Nov. report put bean production at 3.204 b.b. up from the year prior of 3.063. Quarterly stocks on hand as of Jan. 1st are guessed at 1.315 b.b. and carry over for Sept. 1, 2007 are put at 586 m.b. up 21 m.b. from our Nov. report. If true it would be negative but not bearish. With funds long more than double what traders had thought brought on selling early this week and unless a bullish surprise comes out of the report the trade looks for some more long liquidation. Like corn, the conservative trader can approach this potentially very volatile report and week ahead with the Feb. options which trade against the March futures. At the writing of this report, a Feb. 6.70 call was 10 cents or $500. and the 6.50 put 8 cents or $400. They are affordable and a fixed risk. Though near term still looks lower, 2007 is setting up to be a big bull year for beans.

WHEAT:

Monday's weekly export inspection report showed 10.6 m.b. of wheat was inspected for near term export, down from 19.6 the week prior and 22.6 a year ago. Year to date inspections are 495 m.b. versus 620 a year ago. In part, Friday's crop report has importers backing away but wheat continues to be in a weak demand scenario until new crop harvest begins late May. Into he meantime everyone looks to Friday's crop report for the winter crop planted acres report. First of all pre-report trade guesses peg our 2007 carry over stocks to come in at 458 m.b. up 28 m.b. from the Nov. report; still a very tight ending stock figure. Our winter wheat crop planted last fall and now lying dormant until spring is expected to see a jump in our planted acres report Friday. White winter wheat planted mainly in our northwest is put at 4.2 million acres planted versus 3.850 in 2006. Soft red winter wheat planted from MO, IL east to OH and our far southern delta sates is put at 7.0 m.a. versus 7.385. Our hard red winter wheat planted from NT, KS south into CO, OK and TX and is the wheat grown for export is pegged at 32 m.a. versus 29.340 last year with total winter wheat acre varieties at 44.2 m.a. up from 40.575 last year. Anything over is bearish and under is bullish for the opening Friday. Consider the Feb. 4.50 put for 10 cents and the 4.60 call for 8 cents or $400.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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