Alaron Grains and Oilseeds Comment

CHICAGO - Feb 8/08 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

- Government Numbers -

Thursdays weekly export sales report showed 1.029 M.M.T. of corn was sold last week, off 46% from the prior week but the previous week was a huge number.   Asian sales were 300 T.M.T. versus 1 M.M.T. the week prior.   Anything over 1 M.M.T. is considered a bullish demand signal.   As I have been saying since last fall, I look for demand or exports in 2008 to far exceed 2007 as China keeps more corn home to address dire domestic needs for expanding feedlot populations and bio-fuel production leaving the U.S. to supply their surrounding Asian neighbors with their needs.

Friday's USDA monthly crop report came out ahead of the opening showing our ending stocks come the end of the grain marketing year September 1st will be 1.438 b.b. unchanged from the month prior.   The trade had expected a 10 to 20 m.b. cut.   What a week of volatility!   Needless to say, corn remains bullish long term into our fall harvest with possibly our sharpest grains as harvest begins in September and ethanol plants and feeders grab their share of cash inventory.   Near term, corn will be the caboose of this train, following behind the acreage buying lead of beans and spring wheat futures.   As corn feels comfortable it will maintain an acreage base to not run out of inventory next year.   Manage your money closely now as we are past our USDA crop report and Asian markets are closed through February 12^th, leaving corn and other grains to feed off old thoughts.   We come in each day and look to crude oil, the dollar index, metals and stocks for outside direction lead.   Know where support is and trail profit stops.   We had a December price correction and a January correction, so it's not unthinkable February may have one as well before a potentially, very bullish drive occurs into the March 31^st planted acreage report.   May corn has support at 5.15.   New crop December support lies at 5.10.

Thursday's weekly export sales report came out a whopping 1.037 M.M.T. of beans sold last week, up from 488 T.M.T. the previous week and 86% over our four week average.   Key world player China was in for 503 T.M.T. versus 149 the week before.   China continues to buy U.S. beans and South American beans, while posting no cancellations of previous U.S. purchases.   This is important as this time of year usually sees them switching previous U.S. purchases to Brazil for better value but their needs are too great.   They need the beans to crush for the meal on expanding hog and chicken populations and the oil for cooking.

Friday's USDA crop report put ending stocks at 160 m.b. down 15 m.b. from the month prior, down 7 m.b. from the average prior  report guess and well under our 2007 stocks of 574 m.b.   They left production numbers in Argentina and Brazil unchanged as I said they would and look for a lower South American number on the March report as yields will be far enough along to know crop size.   The lower bean stocks came on a 10 m.b. increase in demand and a 5 m.b. crush increase.   Ok, too simple here.   Beans simply keep seeking that higher price to ensure farmers plant 6 m.A. or more so that current demand doesn't leave us out of bean come May 2009.   The index funds will find that price before March yields its big planted acreage report at March end.   May beans have minor support at 3.55.   New crop November support is 12.90.

Thursday's weekly export sales report shows 312 T.M.T. of wheat was sold last week off 39% from the week prior and 18% under our  four weeks average.   The way to look at this is that as long as the U.S. and world ending stocks are at 3 decade lows, any sales are bullish.   If we were seeing cancellations and weekly sales were going negative, it would say price has rational demand but exports still surface at historic highs as long as spring wheat acres to be planted remain uncertain and our winter wheat crop yields and quality lie ahead soon as dormancy breaks in March.  

Front months continue to be the leader as we need a price high enough to ensure spring wheat crop planters don't switch to beans come May's planting but get ready for a change in psychology.   At some point soon, the trade will decide the price of Minneapolis spring wheat futures are high enough to have saved acres and demand will turn to the Kansas City Exchange hard red winter wheat and C.B.T. soft red winter wheat futures as dormancy breaks in March.   The crop went dormant in poor condition and it's the first crop to start growing and give us a chance to replenish inventory.   New crop K.C. is July and C.B.T. September futures.   Friday's USDA crop report lowered ending stocks come wheats marketing year end June 1^st to 272 m.b., 2 m.b. under the average guess and 20 under last month.   They increased exports 25 m.b. but decreased feed use 5 m.b.   May C.B.T. wheat has support at 10.75 Monday.   May Kansas City wheat futures have support at 11.00.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

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