Alaron Grains and Oilseeds Comment

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

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Wednesday's Monthly USDA Crop Report came out generally in line with expectations.   Due to the late planting dates and excessively wet and cool conditions, the government lowered expected yield potential to 153.4 b.p.a. or 2 b.p.a. under the last report and pegged production at 11.935 b.b. vs. 12.090 last month.   These numbers should be forgotten as whether each week into pollination will change yield potential sharply either way.   On ending stocks they left this year's inventory came the start of the new marketing year of September 1^st at 1.600 b.b. unchanged from the month prior and 7 m.s. under pre-report trade guesses.   But here is what you need to note from this report:   They cut new crop ending stocks come September 1^, 2010 to 1.090 b.b. vs. 1.145 last month and 1.600 this year.   Odds are we will be sitting between 700 m.b. and 900 m.b. ending stocks early next spring.   This all but assures new historic high prices before July 30, 2010.   We could see it this year if drought like conditions move in during July and August but next year's ending stocks mean corn has to find a price high enough going into next spring's Planting Season to steal 4 to 6 m.a. away from beans or even a mild drought could leave us out of corn in 2010.   That is going to be difficult to steal those acres from beans as we are in year two of record world bean demand and in need of planting more bean acres or potentially run out of beans.   This leaves corn one other choice, and that is to seek a price high enough to discourage over usage and demand.   Now how high is that?   The market will decide that and soon.   Either way, you have not seen corn's high yet.   We have a long way to go.   Last Monday's Crop Condition Report showed a 1% decline in the good to excellent condition of the crop from the week prior due to overly wet soil and sharply cooler than needed temperatures.   They did have the condition number over the year prior by 9% even though we are as overly wet as last year- but much cooler.   This suggests their estimate is too high and look for another quality decline on Monday's report update at 3:00p.   The current weather outlook is another big rain system in the Eastern Grain Belt on Sunday, Monday, Wednesday and Thursday.   This will cause further delays on the remainder of corn acres to be planted and quality concerns.   Remember since next year's ending inventory is projected so low, we have to have perfect to better than perfect to increase yields and quality not the reverse.   There will be a change in psychology next week come Tuesday as WXRISK.COM the weather site sees a chance for a heat dome to come into the Midwest by Thursday and last to June 25^th or about a week.   Initially grains will pull back saying great we can dry out and finish planting with the heat improving quality.   Then they will turn quickly as it moves into to a reverse psychology of fear that we are now going from too wet and cold to too hot and dry.   The market trades fear before fact and this they did last year.   We start the week higher off wet conditions then a pull back on the heat dome then a rally to new highs.   Technical's read like this:   July support through today was 4.32.   A close under and 4.22 is next stop.   Buy support.   Resistance is 4.50.   Do not sell resistance but add on with a close over and look for 4.62 to 4.74 area to be hit into the June 30^th Acreage Report.

Wednesday's Crop Report put old crop ending stocks come September 1^st at 110 m.b. vs. 130 last month and down for the fifth consecutive month and next year's ending stocks at 210 down from 230 the month prior.   Both saw 20 m.b. cuts on the month and in line with pre-report trade guesses.   They came to lower inventory the same as each month this year.   More beans being crushed to get the meal and oil and increased exports.   Though the trade sees the numbers as neutral on report day as they ran the market up into the report to reflect the numbers; they remain extremely bullish near to long term.   We are sure to take out last year's historic highs sometime in the next 13 months.   It could be done this year if a drought stretch settles in between July 20^th and August 25^th or the battle for acres and rationing next spring and summer when stocks get even tighter.   However- stay focused near term and get ready for the Summer Growing Season and all the uncertainties that weather is sure to bring.   WXRISK.COM gave us a wet week this week with bean planting progressing maybe 7 to 10% from last Monday's update leaving Illinois, Indiana, Missouri and Ohio way behind on   planting with those states seeing two more big rains before next Thursday.   The next chance to get any measurable seeding done is June 20^th and that is only if the projected heat dome moves in next Thursday as expected.   Keep buying the dips in beans into the June 30^th Planting Acreage Report.   The initial trade thinking will be that we have futures contracts but it is more bullish for new crop contracts.   Support on July lies at 12.35 with first resistance at 13.00.   Buy support or dips.   We look to start higher on Monday on   wet weather then a dip tues' on talk of the heat dome late week ending or cold wet problem but finish the week strong on concerns the heat and dryness could continue.

Wednesday's Crop Report for wheat could only be described as boring.   Every stat was in line with pre-report estimates.   Ending stocks come the start of wheat's new marketing year on June 1, 2010 were 647 m.b. up 10 m.b. from last month and 22 under this year.   It is more than enough with weak demand to keep bins full into next year.   They lowered our Winter Wheat Production to 1.492 b.b. vs. 1.496 last month with hard red winter wheat at 867.6 m.s.   Soft red winter variety at 415.4 m.b. and white wheat at 208.7 m.b.   The report in whole says that even though adverse weather hit the winter wheat crop, supplies remain at record levels to the 306 m.b. ending stocks in 2008 that took wheat to historic high prices.   That leaves wheat to follow corn and beans while keeping an eye on our Spring Wheat crop weather and progress into August.   5.74 is support for July Wheat.   That should hold but if not 5.56 is next.   Cautious buyers wait for a close over 6.08 to buy.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

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