WEEKLY GRAIN UPDATE

For week ending June 20, 2008

by

LYNN SMITH

Senior Futures Broker

ZANER GROUP

800-470-1406

lsmith@zaner.com

SOYBEANS

On Monday, June 16^th, 2008, July Beans closed down 26 cents at 15.34, after gapping sharply higher on the open. July Beans opened 20 cents over Friday's high at 15.90, but only pushed to 15.93, just short of the contract high at 15.96, before losing momentum with little follow thru buying. Profit taking and technical selling than pushed the market sharply lower to 15.25, before some bargain hunting erased some of the losses at the close. Spillover weakness from Crude Oil also contributed to the weakness, along with drier weather forecasts for the balance of the week. During the session, the USDA reported Soybean export inspections totaled 12.7 million bushels vs. 3.983 m.b. last week, and 6.3 m.b. the year prior. It was a good report and shows that the U.S. is capturing a large portion of the Worlds importing needs with the ongoing farmer/government turmoil in Argentina. Funds sold an estimated 3,000 contracts during the session. After the close, the USDA reported 84 percent of the Bean crop is now planted vs. 77 percent last week and 92 percent the ten year average. They also indicated 56 percent of the planted crop was in the good/excellent category vs. 57 percent last week and 65 percent the ten year average. The report was in line with analyst's expectations which saw little planting activity last week with the wet weather, however dry weather this coming week should allow for rapid planting progress and the planting

percentage could approach the average for this time of the year. July Beans closed at 15.58, up 24 cents on "turnaround Tuesday", taking back most of the loss from yesterday's trade. Reports of increased strike activity in Argentina by the farmers who are protesting the government's imposition of a tax on their grain exports sparked buying interest since the South American business will probably go to U.S. supply. Crop damage estimates from the floods in Iowa show about 15 to 20 percent "complete loss" of acreage that will not be replanted because of the late date. Iowa was expected to plant about 13.2 million acres of Corn and 9.8 m.a. of Beans this season. Although the weather forecasts are mostly drier through the end of the week for most of Iowa, it will take days or perhaps weeks before flooded areas can be re-entered, and by than it may be too late to plant. Funds bought an estimated 3,000 contracts during the session. On Wednesday, July Beans closed at 15.56, down 2 cents, on talks the farmer/government standoff in Argentina might be resolved shortly, along with drier weather forecasts for the next 6- 10 days in the Midwest Bean belt. However, the downside appears to be limited with better than expected demand and a smaller carryover for 2008/09 with the massive flooding in Iowa and parts of Illinois and Indiana. Funds sold an estimated 2,000 contracts during the session. July Beans closed at 15.45 ½, down 10 ½ cents on Thursday, on negative demand news along with improving weather forecasts. News that China had cancelled a large old crop export sale from the U.S. gave traders ideas that the farmer strike in Argentina may be ending soon, leading to further U.S. export cancellations since South America undercuts our cash market prices by 25 cents or more a bushel. Prior to the open, the USDA reported exports totaled 171,200 metric tons vs.272, 000 m.t. the week prior. Spillover weakness from Crude Oil along with a strong U.S. dollar also pressed the market to a low of 15.15, before profit taking and short covering brought the market back to settle with only modest losses for the session. Funds sold an estimated 2,000 contracts during the session. On Friday, July Beans closed down 13 cents at 15.32 ½, as improving weather forecasts and a temporary stop of the farmer strike in Argentina continued the correction that began on Monday. Although drier conditions may be bearish short term, a continuation of the drier forecasts could lead to talk of "drought: conditions, which has been forecast by some of the large private weather firms going into late July and early August. If that would occur, it would be extremely bullish for both Corn and Beans. Any continuation of the correction should be limited to the early trading next week as I anticipate a bullish bias going into weekend with the USDA acreage report to be released on June 30^th. In last week's report, I recommended buying the September $20.00 call for 35 cents, which should have been filled on Monday, however, the sell stop I suggested of 25 cents should have been filled on Wednesday, for a gross loss of 10 cents ($500.) less trade costs. Next week I would look to buy the September $20.00 call for 15 cents or less, risk to 10 cents and target 30 cents or higher for profit taking.

CORN

On Monday, June 16^th, 2008, July Corn gapped higher at 7.60, less than two cents off the daily limit if 30 cents, before profit taking and spillover weakness from Beans and Crude Oil pushed the market to negative territory at 7.25, down 6 ¾ cents, before closing at 7.32 ½, up ¾ cent for the day. Widespread flooding in Iowa and other key areas of the Midwest prompted the early buying, however much of the adverse news may have been factored into the current pricing, so the market seized the opportunity to take some profits of the table. During the session the USDA reported Corn export inspections totaled 38.1 million bushels vs. 36.3 m.b. last week, and 40.4 m.b. the year prior. It was a good report considering Corn prices have risen over 1.00 a bushel over the last 10 days. and leads to ideas that importers may wish to buy now to avoid even higher prices going forward. After the close, the USDA reported 57 percent of the Corn crop was rated in the good/excellent category vs. 60 percent last week and 69 percent the 10 year average. They also indicated 9 percent of the Iowa Corn crop is flooded, which equals about 1.19 million acres. The drop in crop ratings was expected, although the percentage of acreage under water seems a little on the light side. July Corn closed at 7.42 ¼, up 9 ¾ cents on Tuesday, although it was the first time that it did not make a new contract high since June 4^th. Some traders had expected a larger reduction in the crop rating for Corn which the USDA reported at a 3 percent decline. However, it was still the lowest rating since 1996 for this time of the year. Preliminary estimates from researchers at Ball State University and the University of Tennessee put total agricultural damage in Iowa at $2.7 Billion. The market is looking to the June 30^th USDA acreage report to see the extent of acreage loss as projected by the government. On Wednesday, July Corn closed up 4 cents at 7.46 ¼, on continued concern regarding the widespread flood damage in Iowa and part of Illinois West, which was countered by drier weather forecasts in most of the Midwest going into the weekend. Although farmers could plant Corn with a shorter season maturity as late as June 25-26^th, which variety would likely result in 30 to 40 percent lower yields than normal, so that might induce planting of Beans instead. July Corn closed down 18 ½ cents at 7.27 ¾ on Thursday, as profit taking after drier weather forecasts along with concern that Congress was considering a bill to limit

speculative investment in the commodity index funds pressured the market. Spillover weakness from a sharply lower Crude Oil market also contributed to the negative sentiment, along with a stronger U.S. dollar. Prior to the open, the USDA reported Corn exports totaled 343,000 metric tons last week vs. 524,000 m.t. the week prior. It was a negative report as it appears the higher Corn prices has induced importers to back off awaiting further developments. Funds sold an estimated 5,000 contracts during the session. On Friday, July Corn closed down 6 ½ cents at 7.21 ¼, as drier weather forecasts and a report from Inform Economics which projected Corn planted acreage at 87.4 million acres. Up from its estimate of 87.2 m.a. last month. Some traders disagreed with the assessment since they only reduced 900,000 acres due to the flooding in June, with many analysts looking for a reduction of 1.5 million acres in Iowa alone. However, the report was sufficient to push the market lower with a lack of bullish news to counteract its affect. In last weeks report, I recommended buying the September $9.00 call for 25 cents or less, which should have been filled on Wednesday, however the recommended sell stop should have been filled on Thursday at 18 cents, for a loss of 7 cents ($350) plus trade costs. If we have any follow through sell off next week, look to buy the September $9.00 call for 12 cents or less, risk to 6 cents and target 24 cents or more for profit taking.

WHEAT

On Monday, June 16^th, 2008, July CBOT Wheat closed at 8.76 ½, down 5 ½ cents, after pushing to a two month high at 9.10, before profit taking and spillover weakness from Corn, Beans and Crude Oil pushed the market negative for the session. CBOT Wheat futures still carry a healthy premium to cash prices which may evaporate as we approach 50 percent harvested in the winter Wheat crop. During the session, the USDA reported Wheat export inspections totaled 14.665 million bushels last week vs. 19.4 m.b. the week prior. It was slightly below expectations, although the market seemed to shrug off the negative demand indicator until weakness in other markets pushed the market lower. KCBT July Wheat closed at 9.21, down 3 ¼ cents for the day; while MGE July Wheat closed 6 ¾ cents lower at 9.71 ¼. Funds bought an estimated 3,000 contracts during the session. After the close, the USDA reported 67 percent of the spring Wheat crop was in the good/excellent category vs. 63 percent last week and 69 percent the 10 year average. They also indicated 47 percent of the winter Wheat crop was in the good/excellent category vs. 50 percent last year at this time. They went onto to report that 16 percent of the winter Wheat crop has been harvested vs. 19 percent the 10 year average. July CBOT Wheat closed up 21 ¾ cents at 8.98 ¼ on "turnaround Tuesday", as the first official estimate of Australia's winter Wheat crop by their Bureau of Agricultural and Resource Economics came in at 23.7 million metric tons, off 8.8 percent from their March estimate, but still up from last years 13.0 m.m.t.. The ongoing strike in Argentina is also impacting the Wheat exports from that country with ideas that some of their business may make its way to U.S. Wheat. The reduction is the size of Australia's Wheat crop stopped the thinking that "Big Wheat crops are only getting bigger" and with

heavy rain in parts of the middle Plains overnight further delaying winter Wheat harvesting, the psychology of the market appears to have turned around. KCBY July Wheat closed up 18 cents at 9.39, with MGE July Wheat at 10.90, up 25 cents for the session. Funds bought an estimated 3,000 CBOT contracts during the session. On Wednesday, July CBOT Wheat closed at 9.04, up 5 ¾ cents, after hitting a two month high at 9.13, which gave way to light profit taking at session end. Spillover support from Corn and technical buying pushed the market higher, along with short covering by the non-commercial speculative funds that were short 30,285 CBOT Wheat futures and options as of June 10^th. The recent forecast of a reduction in the size of the Australian Wheat crop also was supportive, as was short term forecasts of dry weather. KCBT July Wheat closed at 9.45 ¼, up 6 ¼ cents, with MGE July Wheat at 10.95, up 5 cents for the session. July Wheat closed 23 cents lower on Thursday at 8.81, as profit taking along with spillover pressure from Corn, Crude Oil, and Beans pushed the market sharply lower. Egypt cancelled a tender to buy 55,000 to 60,000 metric tons of Wheat for late July shipment because they felt prices were too high. During the session, the USDA reported Wheat export sales totaled 538,100 last week vs. 335,100 the week prior. It was a solid report as most analysts had only expected a range of 200,000 to 350,000 metric tons. Wheat continues to follow Corn's lead even as the winter Wheat harvest continues with its bearish implications for pricing. KCBT July Wheat closed at 9.30, down 15 ¼ cents and MGE July Wheat closed at 10.90, down 5 cents for the session. On Friday, July Wheat closed 14 ½ cents lower, at 8.66 ½, on profit taking and spillover weakness from Corn and Soybeans. Drier weather forecasts permitting rapid harvest progress kept prices on the defensive, especially with traders looking for big increases in carry out as the winter Wheat harvest nears completion. KCBT July Wheat closed down 15 cents to $9.15, with MGR July Wheat at 10.93, up 3 cents for the session. Funds bought an estimated 2,000 contracts during the session. In last week's report, I recommended buying the September $8.00 put for 30 cents or less, which should have been filled on Tuesday, risk to 20 cents and target 60 cents or more for profit taking. We did not hit my price target last week, so hold the long call from 30 cents and target 50 cents or more for profit taking.

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Opinions are subject to change at any time, and are not a solicitation or recommendation to buy or sell commodity futures or commodity options. The information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness.