Alaron Grains and Oilseeds Comment

CHICAGO - Jan 11/08 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

The monthly USDA crop report came out and as expected, we saw great volatility across the grain board.   They put our final 2007 corn production number at a historic high 13.074 b.b. off 32 m.b. from our average pre-report trade guesses.   94 m.b. under the last report in November and 2.539 b.b. over 2006.   Yield was pegged at 151 b.p.a. with ending stocks come September 1, 2008 at 1.438 b.b. down 359 m.b. from last month's report.   This confirms that usage continues to outpace production.   The large drop in ending stocks came largely from increased corn to feed lot populations by 300 m.b.   This had corn open up the 20 cent limit from March through December futures.   The long and short of this is there was no new revelations in this report.   The 14 m.a. more planted in 2007 and record crop is not enough acres to meet demand.   Corn's high is far off as we continue to price in increased corn needs for increases in feed lot populations.   Ethanol production here and abroad especially in China and Asian neighbors.   The key to trading corn is not seeing it as overbought as traditional U.S. grain traders suggest.   We are in a world trading market environment and inflationary conditions elsewhere make corn very cheap here.   We come in Monday with support for March futures at 4.70.

Today's crop report was similar to corn with lower adjustments everywhere.   Final 2007 production was 2.585 b.b. down 9 m.b. from the November report and well under our 2006 production of 3.188 b.b. yield was put at 41.2 b.p.a.   While ending stocks for September 1, 2008 came in at 175 m.b. vs.. 185 last month.   Changes were fairly moderate but we saw trade into midsession from 40 to 50 cents higher on one urgent sense of reasoning.   We saw a sharp decline in corn ending stocks as demand outstripped a record production, suggesting that if you do not want to run out of corn in 2009 we better find a higher price to encourage more corn planting.   We planted 14 m.a. more in 2007 of which 11 m.a. were stolen from beans.   Beans too see the current pace of usage leaving their tank empty come 2009 and a mission to find a price high enough by march not only to keep from losing more acres to corn but find 6 to 8 m.a. more to insure we do not run out.   Stay long but know where the exit is incase one of those long awaited corrections come.   Support on March beans lies at 12.70.

The wheat report was the real surprise to the trade as record high prices suggests a measurable increase in planting.   Our winter wheat crop now lying dormant until March came in at 46.610 m.a. planted up 1.626 m.a. from our last crop but 2.0 m.a. under pre-report trade guesses.   The break down of winter wheat varieties read like this:   White winter wheat 3.7 m.a. seeded vs. 3.3 last year.   Soft red wheat delivered against Chicago Board of Trade Futures at 10.500 m.a. vs.. 8.650 a year ago and the surprise the hard red wheat delivered against Kansas City Exchange Futures at 32.500 m.a. down from 32.940 a year ago and 2.4 m.a. under pre-report trade guesses.   All this had all three exchanges seeing up 30 cent limit trade at some point.   With ending stocks inventory put at 292 m.b. or roughly 3 decade lows we need much more acres planted, not less.   This will make the March through May growing season extremely volatile as we need better than perfect growing weather and we will rely on wxrisk.com for hard red winter wheat state weather updates by the hour.   Needless to say, exchange spreaders will talk up the long Kansas City contracts short Chicago Board of Trade.   Take note of the Minneapolis Exchange where our spring wheat futures are delivered against as the need for more spring wheat futures is greater than ever and spring wheat acres go to seed with soy beans.   Beans want those acres.   Do not forget the grain step child oats.   Who wants to plant oats?

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

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