Alaron Grains and Oilseeds Comment

CHICAGO - Sep 7/07 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Corn:

Friday's weekly export sales report showed old and new marketing year sales combined at 1.115 m.m.t. down from 1.600 the week prior. It is a good demand signal on the week but we always see good sales ahead of a USDA crop report such as we have next Wednesday. Either way, demand is good.

When we come in Monday traders will be largely focused on Wednesday's 7:30 a.m. central time USDA monthly crop production report. Some private crop forecasters are projecting a slight increase in corn production which the August report pegged it at 13.054 b.b. with a 152.8 bushel per acre yield. I expect the range of estimates to be very wide as some look to the overly wet August to have hurt low lying areas and others to say it helped all the level ground crops or the majority. This report could give a big surprise to the market, bullish or bearish as we had one of the most uneven and extreme weather seasons on record. It will be a real test to validate just how capable our bio-genetic seeds. Near term psychology should be that a record crop to come to harvest in September and October will lead to lower cash bids. If that is the case then December corn will certainly push to the 3.05 to 3.18 area. We first have to take out our 3.40 support. But any harvest pressure if it occurs, should be used as a buying opportunity for 2008 spring contracts, as corn remains long term bullish. Even with the huge increase in planted acres this year and our ending stocks going from 1.137 b.b. this year to 1.516 in 2008, we have little room for any production concerns. 2008 sees corn challenged to maintain its marginal ending stocks on these issues. One, as beans move higher ahead of next springs planting to find acres to keep from running out of beans in 2009, corn will follow closely in hopes of not losing any of the 14 m.a. they gained this year when they moved over 4.00 lost spring to gain those acres so we did not run out of corn in 2008. Additionally, record high wheat prices and demand surely have corn growers pondering a switch. Do not forget the US government mandate to increase ethanol production each year through 2012, sees demand only increasing. Corn got the acres it needed in 2007 but can it hang on to hem in 2008 as beans and wheat try to steal them. Next week needs a close on December over 3.50 to remain friendly on the charts.

BEANS

Friday's export sales report showed old and new crop sales after September 1 were 566 t.m.t. with China in for 73 t.m.t. It is not a bullish number but considering we are just off our recent one dollar rally it shows the 9.00 area is fair value to many.

Next Wednesday's crop report looks to be very volatile to beans after as our small planted area this year and projected 2008 ending stocks less than half of 2007 sets us up for a big rally if the USDA unveils a lower than expected production number, as of Friday's early forecast guesses call for a small increase from the August report of 2.626 b.b. and 41.5 b.p.a. yield. Like corn, beans too remain long term bullish with some hoping a post USDA report and harvest progress with bring a soft spot or lower cash bids to get a better buying point for spring futures. We pushed to our support on November of 8.88 and found light buying Friday. Support on Monday and Tuesday lies at 8.90 then 8.94. A close under support is very bearish and could lead to a 50% retrenchment of our recent rally from 8.04 to 9.16. On the other hand a close over 9.16 sets us up for a test of contract highs. There is no secret to beans long term mission. Beans gave up 11 m.a. to corn this year. With ending stocks this year at 575 m.b. a record inventory and next year's ending inventory pegged at 220 m.b. It says that if we plant next spring the same acres as this year 64 m.a., 11 m.a. under the year prior and demand remains the same we will run out of soy beans about May 1, 2009. Since the function of the market is to ration the crop and not allow us to run out, beans will need to move high enough to get acres lost this year back into production. We need at least 5 m.a. more just to maintain current ending stocks. Long term, the March contract looks to gain most as the price to find acres needs to surface before our April planting begins. Spread traders look for opportunities to buy March and sell November 08 contracts as the weight of more acres and productions weights on the shoulders of November 08 new crop harvest.

Wheat

Friday's weekly export sales report showed 718 t.m.t. of wheat was sold last week down 42% from the week prior and 34% under our four week average. It suggests that last week's contract highs have importers backing off and with prices higher this week we might expect lower sales on next week's report.

Note: Next Wednesday's crop report will be void of new production numbers but the ending stocks here and world will be anxiously watched.

We saw signals of a near term top this week as demand pulled back but we held support of 8.05 on December futures and until support is broken, we remain in a technical bull market. Things that lie ahead in September that are important to watch are the beginning of the Canadian wheat harvest and how aggressive they compete against us for world export share and the beginning of the Australian harvest late month as their a ferocious export competitor, so our export share will be challenged. Additionaly, we begin in September the planting of our new winter wheat crop that grows into November then lies dormant until March. We will watch weather in key winter wheat producers Texas, Colorado and Oklahoma.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

www.alaron.com

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