Alaron Grains and Oilseeds Comment

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

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Our first report of the week came with our weekly export inspection report showing 32.4 million bushels of corn was inspected by the USDA for near term shipment.   This was under the week prior of 39.6, our four week average of 37.7 but over a year ago of 23.6 m.b.   It is not a bearish or bullish number, but more neutral toward demand.   We have a monthly USDA crop report out ahead of the opening Friday, importers usually back off ahead of these monthly reports.   Additionally we saw a weather premium high last week late- as we pulled within 14 cents of historic highs.   This too softened demand a little.   Monday's 3:00p crop condition report showed 62% of the crop is in good to excellent condition up 1% from the week prior, up for the fourth consecutive week, but under a year ago of 70% G-E.   Missouri remains the worst of our key Midwest producers at 42% down 2% from the week prior.   6% of the crop is in its silk stage but of all the major Midwest producers, no one is over1%.   It is a neutral report as we run behind a year ago but if this week's weather holds true, we should improve again on next Monday's update.   With projected ending stocks next year to be half of this year and crop conditions well behind a year ago; we really need to see better ratings in the week's ahead.   Last Tuesday and Wednesday, we saw corn rally on our December new crop contract from 7.35 to 7.82, as weather reports called for very hot and dry conditions to enter the western corn-belt and possibly the eastern corn-belt as well this week.   By Saturday, the jet stream buckled leaving weather reports to pull the intense heat out, and add rain to the forecast.   This had traders Monday pulling weather premium profits from last week out with December down the 30 cent limit.   Remember, every Monday we can expect a gap opening one way or the other to some degree as traders price in either confirmation of the week prior week ending weather update or a reversal of it.   Each week, as we move closer to key yield time the weather becomes on even more price sensitive event with more volatility to the market.   This is just one Monday of many through August that will be aggressively traded.   One week of projected heat and dryness does not kill the crop and one week of rain does not make it either.   The trade simply moves to the next report.   In the weather business, we can have a ten day forecast for hot and dry at 7:00a turn to cooler and wetter by 11:00 a.   I have seen it more than once.   A three day stretch over our Fourth of July Holiday, with markets closed is a life time in weather for changes.   It is less viable to change on a normal week with only a gap in trading from Friday to Sunday night and Monday to adjust your trades if the weather changes.   Tuesday saw traders remove the remainder of last week's weather premium and further declines to factor in a sharp drop in crude oil and other outside markets with corn pushing to our 45 cent limit low of 7.02 basis December before buyers entered.   For Wednesday and Thursday, if crude oil and other outside markets see further selling by funds it can spill over to grains pushing us under 7.00.   If energies are done with profit taking, today's 7.02 low may hold as weather gurus are starting to move towards a drier weekend now and traders may want to enter long again at these prices ahead of Friday's Crop Report.

 Monday's weekly export inspection report showed 9 m.b. were inspected for near term export down from 18.6 the week prior, four week average of 11.5; but over a year ago of 5.7.   Not a good demand signal.   Like corn, beans too expect a softer export week ahead of Friday's USDA Crop Report; one thing entering which could be bullish for demand.   Argentina's Congress voted in favor of keeping a tax in place on exported beans.   This could set in motion another round of shipping problems out of there- if farmers decide to sit on grain and block roads etc.   Monday's crop condition report showed 59% of our crop is in G-E condition up 1% from the week prior, up for our third consecutive week but 6% behind a year ago.   The worst state was Missouri at 39% G-E.   Beans too have seen improvement in recent weeks but with ending stocks next year projected to be low and we are starting with a hole to dig out of on ratings.   We are going to need to see appreciable rating increases to be bearish.   The report is neutral to friendly all considering.   Like corn, beans too have priced out of the market last week's weather premium and further selling on energy market declines.   If we see further declines in crude oil and other outside markets beans will push lower as funds liquidate all holdings not just one area.   If energies recover and perception Friday's Crop Report could be bullish- weather sites turning drier, today's low could hold into Friday's report.

Monday's weekly export inspection report showed 18.4 m.b. of wheat was inspected for near term export, up from 17.7 the week prior and 12.3 a year, while over our four week average of 16.7.   Last week's break in prices and empty milling warehouses and shipping bins has everyone in to buy keeping harvest demand robust as expected.   Whether prices are up or down, does not matter as everyone wants wheat at less than half our early spring price highs after inventories hit 60 year lows.   Monday's crop progress report put our winter wheat crop delivered on the Kansas City Exchange Futures at 52% harvested with key producer Kansas at 79%.   Our Spring wheat crop, delivered against Minneapolis Exchange Futures, condition came in at 69% G-E down 5% from the week prior, after five consecutive up weeks.   This was a surprise as traders had expected a small increase.   Key losers were:   Washington, North Dakota, and Montana, each losing 8% from the week prior in the G-E category.   58% of the crop has the head developed vs. the five year average of 70%.   When it comes to wheat, you can not really tell its quality or if it suffered prior damage until the head is developed.   The question now in trader's minds is- as the heads further develop will more problems surface with lower quality levels?   After sharp declines Monday following the other feed-grains, wheat recovered a little today Wednesday it resumes its followers roll to corn.   A better chance of a rebound into Friday is expect.

End.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

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