Alaron Grains and Oilseeds Comment

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

Thursday's weekly export sales report showed 1.0 m.m.t. of corn was sold last week off 43% from the week prior and 35% below a strong four week average.   Asia's sales were off 700 t.m.t.   The two weeks prior these sales numbers were among the highest of the year, so it makes this week's number look as if demand is slowing.   To some extent we do expect a soft spot from time to time especially after weeks of strong numbers.   Last year, this week, we saw a low sales number only to rebound the next three weeks.   With China holding corn back for domestic needs, surrounding Asian neighbors look to continue to turn to the U.S. to fill needs.   Corn continues to follow beans on their quiets not to lose too many acres to beans as they seek enough acres not to run out of beans in 2009.   Corn divorced itself from crude oils influence last week as preparation for Tuesday's 7:30a Central time USDA monthly crop report will be released.   Many believe the government will lower ending stocks on better than expected demand.   Last month's carry over or ending stocks were put at 1.897 billion bushels down from 1.997 the month prior.   On Tuesday's report I said a close over 4.07 would set up a test of minor resistance at 4.14.   We flirted with that Wednesday and Thursday before taking it today.   I said a break through 4.14 then major resistance of 4.24 is next.   A bullish crop report Tuesday and 4.24 is certain.   To negate the near term trend we need a close under 4.08.

Thursday's weekly export sales report showed 803 t.m.t. of beans were sold last week down 28% from the week prior and 34% below our strong four week average.   Key player China was in for 351 t.mt. vs.. 561 the week prior.   Sales the last four weeks have been 803 t.m.t., 1.120 m.m.t., 1.810 m.m.t. and 1.300.   Much of the prior business was China loading up on purchases to meet needs and as a hedge against a poor growing season in Brazil but the last two weeks of sales pulling back maybe a signal much of their needs are met ahead of their new year holiday closings.   That being said, 803 t.m.t. is still a very strong export number leaving demand a driving force.   Beans like corn, divorced itself from outside markets like crude oil late week as they get positioned for Tuesday's big crop report out 2 hours ahead of the opening.   Last month's carry over or ending stocks for 2008 were put at 210 m.b. down 5 m.b. from the month prior lending thought of further cuts as demand was at its highest of the year in November.   On Tuesday, I gave 11.10 basis March as minor resistance with a close over, setting us up for a test of major resistance at 11.60.   We closed at 11.38 today.   If Tuesday's report cuts carry over we could test 11.60 quickly.   Support now lies at 11.10.   We had a sharp 60 cent drop the last week of November into our December 3rd low.   If we get a spike rally off the report, watch out for another  break on month and year end.

Thursday's weekly export sales report showed 235 t.m.t. of wheat was sold last week, off 42% from the week prior and 29% under our weak four week average.   Not a good demand signal for U.S. wheat but world wheat sales remain strong with Egypt and India in bidding for wheat near term while world stocks are at historic lows.   Canada also came out this week confirming just how bad their 2007 wheat crop was off 20.6% from the year prior and their 2007-2008 spring production at 13.8 m.m.t. down from 14.3 on their October report.   Canada is a major export competitor with Australia to the U.S. on Tuesday.   I gave 9.05 as resistance for March C.B.T. wheat.   They hit it Wednesday and broke off Thursday but blew it out today.   I said if a close over 9.05 occurred, then 9.60 was possible near term.   Tuesday's crop report could give it the push it needs if world ending stocks are cut.   I say world and not so much importance on U.S. ending stocks as most importance on U.S. ending stocks as most of the wheat buying is off foreign ports and that is were cuts can come from.   Last month's world ending stocks were put at 145 m.m.t. and U.S. at 312 m.b. all historically low.   The short covering rally from 7.63 to 9.00 was just that, mainly short covering after the huge break from our November 1 contract highs but things are changing and new buyers on next year's production psychology is surfacing.   This is what gave us our close over 9.05 in Chicago today.   Soft red winter wheat delivered on the C.B.T. Exchange contracts and hard red winter wheat delivered against Kansas City contracts have yet to make new contract highs on the year while spring wheat futures delivered against the Minneapolis Exchange Futures have been making new contract highs for over a week.   Reason, our soft red and hard red winter crops are planted and lie dormant until dormancy breaks in March.   Acres can not go away and only Mother Nature come spring can destroy it.   The spring wheat crop out of the Minneapolis Exchange will no go to planting until late spring leaving its planted acres potential in question.   the trade feels that unless spring wheat keeps a price high enough to beans like corn is doing, it too may lose acres to beans as bean continue in search of a price high enough  to insure 6 to 8 m.a. more are planted or we may run out of beans in 2009 with current demand and a low 210 m.b. carry over.   While the winter wheat crop goes mainly to the export market as its good for bread making by millers and breads a mainstay of the European and third world diet, the spring wheat crop largely stays home and bought by domestic millers for baked goods from cakes to pastries as well as bread.   It is generally our  highest protein wheat.   With the smaller Canadian crop flowing across the border and historically low U.S. inventory and now spring wheat acres in doubt, funds have found a new mission for wheat on all exchanges with Minneapolis in the lead roll.  

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

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