We had the USDA report Friday morning and US wheat futures ended up, but below the day's new contact highs, on speculative buying after the USDA forecast bullish 2006 US hard red winter wheat production of 715 million bushels .We look for another 10 cents on the upside in the wheat market.

CBOT corn futures settled with strong gains, as a lower than expected new crop ending stocks estimate and fund buying served as catalysts for the rally. The USDA estimated 2006-07 corn ending stocks at 1.141 billion bushels, almost 50 % lower than the ending stocks estimate for the current crop year. Keep in mind a few years ago we had projected ending stocks close to that 1 billion level and that becomes very bullish for corn. We can plant a lot of corn. The US corn producer has the ability to bury the country in corn if paid to do so. The resources to produce 3 billion bushel required by the ethanol industry by 2015 easily exists. The difference is $4 corn instead of $2 corn. Perhaps South America can produce all the soybeans the world needs and The US can produce all the corn the world needs. Some of our clients are long December corn and short December wheat. This is a seasonal spread that has worked 13 out of the last 15 years. We will be watching this closely. We do not think the highs are in the corn market.

We thought the soybean market was the most vulnerable to a sell off Friday morning. At this point it appears unlikely that the US can grow a small enough 2006 soybean crop to prevent adding to next year's carryout. Even with the funds looming in the back ground with fears of rampant inflation on their minds, it is hard to overlook a hedging strategy that would provide some downside protection from these levels.

However sometimes the metal markets quiet down in the summer months. And if the flow of investment money wants to come into the grain markets we will have higher grain prices this summer regardless of what the fundamentals say.