Alaron Grains and Oilseeds Comment

CHICAGO - Jun 15/07 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn:

Thursday's weekly export sales report showed 531 t.m.t. of corn sold last week up 42% from the week prior and 34% under our four week average. Asian sales slipped to only 185 t.m.t. We need 1 m.m.t. weekly to be bullish and this will not do it for demand but for now it is 90% weather and its impact on emerging crop and 10% demand indicators driving prices. A hot and dry week over our eastern grain belt of Illinois east to Ohio this week took corn prices higher and look to have our Monday 3:00p central time crop condition report show another decline in the good to excellent category of our crop rating report. With our production this year, minus demand showing our ending stocks this year and next near 30 year lows our production can not fall a bushel short. In fact, corn growers better find a price incentive to plant 3 to 4 million acres more next year or ending stocks will fall further as expansion of ethanol on our government mandate into 2012 increases beyond current production levels. This leaves us overly sensitive to weather concerns. Next week, sees some rain to fall in our driest areas of the eastern grain belt but here is the problem. Even if we have 1 to 1.5 inches over 70% coverage as some weather models hint, it will not help the crop or the mind set of the market that is thinking drought. Here's why: We have had one decent eastern belt rain since mid-April. An inch would only give surface roots in a hard soil a lift for 4 to 5 days before the next heat dome enters by the end of next week. Wxrisk.com sees another hot dry dome building across the eastern states on or about the 24 of June and going through the first week of July. So, traders see next week's light rains as too little considering what heat lies ahead in the longer term. If profit takers pull corn back on any showers, use it as a buying opportunity as corn continues to build a weather premium in the market and seek a price higher to buy more acres. Support next week on December is 4.10.

Beans.

Thursday's weekly export sales report showed 221 t.m.t. of beans were sold last week up 11% from the week prior and 4% over our four week average. Key player China was absent from our list for the second week. It is a neutral number at best for demand. Beans this week was a copy of corn. Hot, dry weather and declining eastern grain belt bean conditions took us higher. There is less than no room for error in the growing season as USDA crop reports suggest demand will far exceed production cutting our ending stocks in half come 2008. Beans need to find a price high enough to steal back some of the 8 million acres we lost this year to other crops or 2009 will see ending stocks at zero. Next week's weather suggests only a small chance for a break early week if profit takers pull some trades off if rain enters Tuesday and Wednesday, but like I said in my corn commentary, traders are looking past that rain event to late next week when a broader and lengthier heat dome may move in making early week rains a non-event. Use dips or soft spots too buy. November has support at 8.60 next week.

Wheat.

Thursday's weekly export sales report showed 413 t.m.t. of wheat was sold last week up 19% from the week prior even after prices last week hit contract highs and a two week 70 cent move. As you know from reading my research that my Friday May 18, Tuesday May 22 and Friday May 25 reports I explained that Europeans were beginning to buy US wheat for June harvest delivery that a bear market in May would be the sole port of origin in the world near term to buy quantity and quality milling wheat. It was the May 18 to 25 that saw wheat basis December futures after falling 50 cents bottomed at 4.90 to 4.95 and began its June run up to over6.25. It was not all our demand signal reasoning we have seen excessive rain in the hard red winter wheat states for two straight weeks slowing harvest and threatening quality levels as too much rain late in development cuts yields and quality. The fear in the market next week is more heavy rains are forecast for the overly wet Kansas, Colorado and Dakotas areas leading talk that further quality declines are coming. Monday's crop progress report could show the government playing catch up and cutting our good to excellent category 5 to 8%. last Monday it was cut only 1% and most thought it should be more. After huge rains this week and more on the way, there is room for quality adjustments lower. What is bullish about the market has not changed. We have tight US inventories. World ending stocks are at 30 year lows and key producing countries are experiencing dry conditions as in the Ukraine, Australia, China and Canada planted less all making our current harvest underway here as a highly sought after crop. Now let's look for some bearish insight. If corn and beans are rallying today because they see a heat dome coming in late next week- offsetting what rains will fall early week, then it is possible that the heat dome being called for to cover the wet western grain belt. This may offset the early week rain too having traders saying the worst is over; and the long term hot and dry forecast is just what is needed to stop declining qualities and kick start harvest.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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