Alaron Grains and Oilseeds Comment

CHICAGO - Feb 9/07 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

C O R N:

Thursday's weekly export sales report showed 917 t.m.t. of corn was sold last week up 19% from the week prior and 8% over a good four week average. Asian sales were good at 350 t.m.t. but not great. We want to see 500 or more. Plus, we were under a year ago of 1.5 m.m.t. It is a friendly demand indicator at best. Long term demand remains good as tight ending stocks inventory ahead of our fall harvest should keep front month futures at a premium to Dec. futures especially after our march 30th planted acres report showed the largest acreage number in US history to be harvested and delivered against the new crop Dec. futures contracts. Friday's USDA monthly crop report put our carry over stocks or ending stocks come the start of our new marketing year and harvest Sept. 1st at 752 million bushels the second lowest since 1975, well under last year's 1.967 b.b. Not even close to the 1986 record 4.882 b.b. and unchanged from last month's report. World carry over stocks were up 1.51 million metric tons to 87.95 m.m.t. Argentina and Brazil saw slight increases but it will not compete against US exports as both South American countries look to keep more grain home for their expanding renewable fuel industry that is expanding. Corn traded both sides of unchanged the first hour of trading as the report was a real yawner. This leaves corn to come in Monday with March longs having 13 days left to sell out before delivery notices go out. The Dec. contract has traded for four weeks between 3.88 and 4.04 as no one wants to buy it ahead of the March 30th planted acreage report that could show a 6 to 11 million acre increase in planting and with March holding over 300 thousand open positions with the longs needing to sell before month's end. It is more probable than not March could fill more of the chart gap left from the Jan. 12th report down to 3.80. The Dec. chart gap is down to 3.76. It would take a close over 4.06 to turn chart bullish on December. If corn is going to strengthen next week, it will have to come from traders selling March longs and rolling into May to keep farmers on track to plant the badly needed acres expected march 30th.

B E A N:

Thursday's weekly export sales report came in at 803 t.m.t. sold last week. 19% over the week prior, 8% over a strong four week average and well over last year's 500 t.m.t. China was in for 333 t.m.t. versus 177 the week prior and shows they have yet to switch buying on forward delivery to South American ports. Beans continue to benefit from long liquidation ahead of month end when March deliveries begin for corn as corn traders have a huge long March corn position to sell and their unlikely to roll into Dec. futures ahead of the march 30th acreage report to show a huge acreage jump while the bean acreage looks to decline sharply. This leaves the new crop Nov. beans to benefit from the roll over of corn sells to bean buys. Friday's USDA crop report put carry over stocks at a record 595 m.b. up from 575 last month, 449 last year and 26 m.b. over pre-report trade guesses. World carry over stocks were put at 57.4 m.m.t. up from 56.15 last month while Brazil was left unchanged on production at 56 m.m.t. and Argentina up 1.5 m.m.t. to 44. Though production in South American looks big this year, they look to hold back beans from export for their expanding bio-diesel fuel industry. Nothing has changed with this report. Keep buying Nov. beans on dips. Support is 7.80. the trade looks to be buyers into the March 30th acreage report.

W H E A T:

Our weekly export sales report showed 732 t.m.t. of wheat was sold last week up 31% from the week prior and 56% over a weak four week average. We saw 220 t.m.t. of political sales to Egypt and Iraq and 100 t.m.t. of feed quality wheat to Asia. It is a good number but the buyers will not be there next week and we can expect another pull back on weekly sales. Wheat is not cheap enough that we are getting some of the business out there but not enough to drive futures. Wxrisk.com sees more moisture for the southwest and southern delta as well as Kansas our number one wheat producer through Feb. 23rd. The crop is dormant but this helps top soil and it lends thought to traders that last year's drought is over. Friday's USDA crop report put carry over stocks at 472 m.b. unchanged from last month, under last year of 571 and 2 m.b. under pre-report trade guesses. Nothing to trade off of here. Wheat will continue a follower's roll to corn lead until we get into March when far southwestern winter wheat fields begin to break dormancy and grow, then crop condition reports by those states will rule pricing. Fundamentals are bearish while charts are a little oversold. May wheat needs a close over 4.84 to turn chart bullish. A close under 4.58 sets up up to move to 4.46. If July Kansas City Futures pull back to 4.60 area I will buy my first long positions. It is the July KC Futures that the current crop will be harvested and delivered against. The crop went dormant in poor conditions so it will be challenged to find perfect weather to play catch up on quality conditions. We are starting to see some buying of the KC Futures this week so it maybe hard to pull back to support. With low ending stocks people are getting excited about dormancy breaking next month especially after a 1.10 break of our Oct. high to this week's low on march CBT futures.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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