Alaron Grains and Oilseeds Comment

CHICAGO - Ma09 12/09 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

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The USDA released its Monthly Crop Report ahead of the open.   The key to the report is the ending stocks number which represents the amount of each grain expected to be left over at the start of the New Grain Marketing Year- September 1^st.  This is also the beginning of our new harvest.   It is essentially the U.S. Grain Savings Account.   They put our ending stocks for September 1, 2009 at 1.600 b.b. this is down 100 m.b. from last month 111 m.b. which is under the average pre-report guess, and 45 m.b.-which is under the lowest estimate and down for the third consecutive month.   The USDA also took a stab at our September 1, 2010 ending stocks coming in at 1.145 b.b.   Ignore that number for now as funds will not trade it; their attention is 2009 Fundamentals.   They came to the number for this year by raising exports 50 m.b. and 50 m.b. for domestic usage from ethanol to food.   The report also lowered the World Stocks to 128.2 m.m.t. 139.6 in the New Marketing Year.   The report was a little more bullish than expected but the overall ending stocks for this year are more than ample and leave the growing season of June 1^st through July as the next chance to lower ending stocks for next year.   Near term we go back to trading the weather on planting of this year's crop through the month's end and outside market influence.   Last night's Crop Progress Report showed 48% of our corn crop is now planted.   This is equal last year's slow rain soaked pace and under our five year average of 71%.   The Western Grain Belt continues to plant fast with Iowa 81% seeded and Nebraska 78%.   The problem is the Eastern Corn Belt states and that is what the market will trade.   Illinois is 10% vs. the five year average of 84.   Indiana 11 vs. 70 and Ohio 22 vs. 68%.   The weather site WXRISK.COM sees the Eastern Corn Belt wet Wednesday and Thursday with .50 to 2.00 inches of rain over 70% coverage.   Then again on Saturday through Sunday and .50 to 2.00 with both events seeing heavier rain totals in the Central and Southern Illinois and Indiana.   This will keep planting well behind the average.   The big question now is after pricing in 80% of the planting delay problems and 90% of South America's growing problems are a near term top in with a correction coming so we can get long for the growing season- The funds will tell us this week.   Long term into our summer growing season is sure to bring 5.00 plus corn, but near term July could pull back to 4.10.   If funds continue to add on a close over 4.28 sets up 4.38 then 4.50 as next resistance.   If you remember last Tuesday as I had mentioned- we could see corn move to between the next two resistance prices on the chart of 4.18 to 4.28 into the report- The opening range high was 4.31.

The soybean ending stocks came in down for our fourth consecutive month at 130 m.b.   This was 35 m.b. under last month, 75 m.b. under last year, and equal the average pre-report trade guesses.   They came to these numbers by raising exports 30 m.b. and the crush to get the soy meal and soy oil by 5 m.b.   This all came as South America drought brought crop cuts in April while China was importing 55% more beans in April vs. a year ago.   It all sets the U.S. to see better exports.   No surprise here- with the report telling us everything the trade expected.   Last night's Crop Progress Report showed 14% of the bean crop is planted vs. the five year average of 25% with the Eastern Belt, Illinois East to Ohio furthest behind.   Planting delays are not of any concern as of yet as we can plant up to June 10^th.   Like corn- beans too have priced in 90% of the South American production problem bringing better demand t the U.S. Ports so all are wondering if a profit taking break looms ahead creating a buying opportunity for our summer growing season rally.   On last Friday's report, I gave 10.80 as support to buy.   The low Monday was 10.85.   We had 11.22 then 11.50 as resistance.   We had 11.27 high on the overnight, so we are with the reports range effect.   If funds take profits support is down to 10.80 then worse case scenario 10.50.   A close over 11.30 sets up 11.50 and I am sure eventually we will see 12.20 to 12.50 to totally price in the falling supply and spiraling upward demand.

Too many numbers in this report as wheat's trading range seemed stunned by it all.   First, we had last night's Crop Condition Report for the Winter Wheat Crop coming in at 46% of the crop in good to excellent condition; down 1% from the week prior and 47% a year ago.   It is a bad number and reflects our poor growing weather and the early April freeze that occurred has wheat showing no intent of improving.   Number one Winter Wheat producer Kansas- finally has some head development at 32% headed vs. 3 last week.   Their G-E rating dropped 2% from the week prior.   As more heads mature, we can expect to see further damage from the April freeze.   This could lend to more price strength on supply concerns.   Today's Crop Report cut production.   The total Winter Wheat Crop was estimated by the USDA at 1.502 b.b. down from 1.868 last year and under pre-report guesses of 1.526.   Ending stocks for Wheat's New Marketing Year of June 1^st were put at 669 m.b. down 27 m.b. from April but still a large supply vs. 2008 at 306 m.b.   Inventory remains a weight on prices leaving only Winter Wheat production problems or potential Spring Wheat growing problems a force to take us higher.   I will buy wheat basis July on a pull back to the 5.60 area.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

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