Alaron Grains and Oilseeds Comment

CHICAGO - Dec 1/08 - SNS -- Following is the grain and oilseed futures comment from Alaron Trading Corp.

Friday began with our weekly export sales report, telling us how much of each grain was sold last week and is our strongest gauge of demand.   Corn sales last week were 465t.m.t. up 7% from the week prior and 11% over our weak four week average.   Key Asian business was 268t.m.t. up from 180 the week prior.   We need 700t.m.t. or more to be demand in good and 1.1m.m.t. Or more to be demand great.   So- this number reminds us that importers continue to buy only as needed.   This can change quickly if a corn price low is found and a recovery rally occurs as importers will begin to overbook and build a surplus at value on fear of 2009, bringing a weather event again and soaring prices as seen last summer.   They know the power of these index funds.   In the meantime exports are weak and domestic use will continue under a year ago into early spring off lower cattle, hogs and chicken numbers.   Monday weekly export inspection report showed 32.5m.b. Of corn was inspected for near term export up from 30.5 the week prior but well under a year ago of 56.7.   Inspections year to date are 398m.b. vs. 638 a year ago- another signal of slow demand.   After shorts covered ahead of month end and our Thanksgiving Holiday last week the big question was ‘what would they do with that money when we returned today'?   This is an easy answer as ahead of the grain opening the dollar index was up with crude oil and the Dow Jones down big time leaving that money to pour in as sellers.   It is December and the dead of winter.   Crops are locked up on the form now for higher prices later and little to no fresh fundamental news so; expect corn and other grains to follow outside markets even closer now.   The close today under the December support of 3.50 sets up a move to 2.90 to 3.00 our next support, unless something enters that is not there now.   If Tuesday brings a short covering turn around Tuesday bounce, sell it.   My longer term thinking is once crude oil bottoms, grains will as well; regardless if stock indexes continue lower.   My thinking is December will give us our seasonal crude oil low about $35.00.

Friday's weekly export sales report showed 781t.m.t. of beans were sold last week off 1% from the week prior and 14% under a strong four week average.   China the world's key buyer was in for 654t.m.t. vs. the two prior weeks of 469 and 207.   Though down margin for the week it is still a very bullish demand number and once index funds are done selling their long positions, demand will be a strong pricing force.   China will continue to purchase U.S. beans to fill their mandate for more protein in their diet at least through mid-January when seasonally they turn to South America to begin forward contracting for late February through May shipments as their harvest begins and winds down.   However, this could change if weather threatens their crop leaving China to continue filling needs here.   Currently it has been very dry in Argentina and Brazil.   It has been like this for six weeks and that is uncommon as Brazil has a rain forest weather pattern and this tropical environment always reproduces ample rainfall.   Planting in Brazil and Argentina will continue into mid-December with January and February as their key growing months.   If it continues dry, threatening production, China will begin to over buy here through January and February- this could be extraordinarily bullish for the market.   Keep this in mind:   Brazil has a very sandy soil that requires a lot of moisture as it dries out quickly.   Drought conditions there are accelerated on its effect much faster than here.   Monday's weekly export inspection report came in at 37.4m.b. vs. 40.9 lst week but over a year ago of 27m.b. year today inspections are 351m.b. vs. 311 a year ago.   Like corn, beans too saw heavy reselling of last weeks profit taking pushing beans down 41 cents in early trade today.   The weak close suggests a test of next support basis January futures of 7.90 to 8.00.

Friday's weekly export sales report showed 438t.m.t. of wheat was sold last week down 14% from the week prior but up11% from our four week average; Not a good number but not a bad one either.   The week to week comparison says we are still a third port of origin for wheat importers but the better four week average suggests the triple bottom support on the charts could be telling importers seasonal price lows are in.   Monday's weekly export inspections report came in at 19.8m.b.; this is down from 22 the week prior and equal a year ago.   Year to date inspections are 90m.b. behind a year ago.   The December wheat futures flirted with the 5.00 area again for the fourth time since late October.   If they break this solid 5.00 support, 4.50 is next stop.   We need a close over 5.40 to take out minor resistance.

End.

Tim Hannagan

Alaron Research Team

800.563.9510

thannagan@alaron.com

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