Alaron Grains and Oilseeds Comment

CHICAGO - Jun 26/09 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

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Thursday's Weekly Export Sales Report showed 686 t.m.t. of corn was sold for old crop delivery and 250 t.m.t. for new crop delivery season after September 1^st for a total of 936 t.m.t. vs. 1.1 m.m.t. last week.   Key Asian customers were in for 410 t.m.t. vs. 220 last week.   Today's report told us corn's value on the world market.   When we were at 4.25 to 4.50 the Asian community said let's back off purchases as there is no shortage of corn near term with an ending stock carryover of 1.6 b.b. but now that we are under 4.00 there back as aggressive buyers.   The market spent mid-week trading a friendly mindset to the Tuesday, June 30^th 7:30a central time Planted Acreage Report by the USDA.   However late week saw a turn to the Bearish weather mindset.   With the crops in the ground, early emergence condition is well ahead of last year due to the ample top soil moisture.   The recent heat wave was also viewed as bearish as corn needed to have warmer evenings and in need of some hot sunny days to dry out low areas and get those heating degree days needed.   WXRISK.COM sees next week as ideal weather with the heat pulling out and temperatures running normal to below normal and moisture at normal to above.   Note:   Below normal temperatures in July are still very warm and beneficial for crop development.   Though weather looks to be a bearish pricing force, it could change quickly.   There is some thinking the current heat dome this past week, though pulling out for next week will end up sitting in the Southwest and may end up radiating back into the Western Grain Belt repeatedly.   That is about 35% of our course grain in Iowa, Nebraska and the Dakotas.   We will watch these weather issues closely through July and August.   For the start of the new week weather takes a back seat for Monday and Tuesday as we await release of the Acreage Report.   After Tuesday's Report has its way with market volatility, we will come in Wednesday with weather and its impact on emerging corn and beans as 90% of our pricing influence.   So- what about this highly debated Planted Acreage Report?   There are four camps of thinking out there throwing their acreage estimates at us to think about:

1. For those who prior to the March 31^st Planted Acreage Report had estimated current supply demand fundamental would have growers plant 3 to 5 million less acres of corn and 3 to 5 m.a. more beans.   They are determined to be right so they believe the government was wrong last march and will admit it on the June report.
2. There are those who believe that the March 31^st report left about 5 m.a. unaccounted for- that they were not put into the conservation program.   Farmers would not leave land idle, so where did they go was the talk.   Some believe the government math will find the acres and put it to beans more than corn and that would correct what they believe was a too low bean acre number on the March report.
3. For those who believe the extremely wet spring and late planting for corn had some growers switch to beans which can be planted later.   This would mean tossing out expensive corn seed and fertilizers and repurchasing bean supplies.   Not likely.
4. For those who believe the Government Report in March was correct, and the Weekly Crop Progress Report is correct as well.   This would mean that Tuesday's Report would show a lower corn and bean number on acres vs. the March 31^st Report.   If June 20^th was the last date to add acres planted by the USDA and the June 22^nd Weekly Crop Progress Report had 9% of the originally projected acres still unplanted for beans; it makes sense bean acres would come in lower.   This would mean the government would just do an adjustment in July or August Monthly Reports if remaining acres end up planted.

As you see there are good arguments for all four ideas.   The common theme still has three of the four ideas leading to less corn and more bean acres.   The poll of the major brokerage houses had the average corn acres at 84.158 m.a. vs. 84.986 in March and 85.982 in 2008.   The average bean estimate is 78.305 m.a. vs. 76.024 in March and 75.718 in 2008.   If there is going to be a surprise it will come as a lower bean number as the average estimate is 2.2 m.a. over the March number and suggests there are short futures.   This would set up a Big Report Day Rally.   I see bean acres at 75.3 and corn 84.1 but my opinion is that the conservative trader should not have a position on for this report as it's is set up to possibly have a big opening up or down.   When we come in Wednesday, they will say it is not what you plant, but what you grow.   How's the weather?   A Bullish corn number and New Crop December Futures could come back up to 4.40.   A Bearish Number and good weather sees 3.80 to 3.90.   On beans a Bullish Acreage Number could take November New Crop Futures back to the old 11.00 high and a Bearish Report with good weather a test of 9.50 would be seen.

Thursday's Weekly Export Sales Report showed old and new crop sales of beans came in at 243 t.m.t. with China in for 37 t.m.t. vs. 49 the week prior and well under the May average of 160 t.m.t.   China's just being a smart consumer.   They have backed off buying old crop delivery beans that they drove to new 13.oo per bushel and began buying a little for new crop delivery for after September 1^st but buying more beans from Brazil at cheaper prices then they will return to the U.S. as our harvest begins at what they perceive will be cheaper harvest prices.   U.S. demand has slowed but world demand remains robust.

Thursday's Weekly Export Sales Report came in weak as expected at 368 t.m.t. with, past sales to third world countries more concerned about value than quality.   That is the problem with demand.   The U.S. and the world are awash with low quality wheat.   If demand is going to return to the U.S. Ports and drive prices it will come from our Spring Wheat Crop to come to harvest late summer.   Its condition or quality level is high and getting better.   We could be the primary port of origin in August for high quality milling wheat if weather continues well.   Watch the Minneapolis Wheat Exchange Futures for a buying opportunity in July as the Spring Wheat Crop is delivered against their Exchange Futures.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

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