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August 25, 2006

Futures markets showed some strength this week after a 3 week freefall. CBOT nearbys up 14 cents/bu on technical fund buying. KCBOT up 5 cents on fundamentals from continued dry conditions in the Southern Plains, just weeks away from planting. This week's IGC report followed USDA's huge EU production cut, showing very tight world supplies. MGE nearbys down 4 cents/bu as harvest pressure has capped both futures and basis premiums

During the US futures downdraft this month competing exporter prices rose. In the Egyptian tender this week US SW was the most competitively priced offer followed by Canadian and US SRW. Egypt passed on all offers citing high prices

SRW nearby basis up another 17 cents/bushel this week to 47 cents ($17/MT), 35 cents/bushel higher than August 4 and the highest since February

Barge rates stable at strong values. The lower Mississippi was closed to traffic after a couple vessels ran aground. Water levels are still low, reducing capacity and keeping prices supported at current high levels. Minneapolis to NOLA at $37/MT, 36% higher than June rates

Rail rates jumped on tight capacity and an expectation that grain exports will continue to remain strong

The durum price range stable at $5.55 to $6.43/bu ($204 to $236/MT)

Rains in the Northern Plains are delaying harvest and could cause quality problems for the 20% HRS and 50% durum still uncut. The rain could lead to the third consecutive poor quality Canadian crop

A protein market for Lakes HRS has emerged based on a wider variety of protein content in the North Dakota harvest. Premiums for 14.5% protein HRS at 50 cents/bu and 15% (not shown on the Price Report) at 60 cents

Strong futures and basis prices have pushed SRW cash values up to a 20 cent/bu ($7/MT) premium over SW, from parity last week

Ocean freight rates eased this week, leading some observers to call this the top of the market. The Panama Canal wait has more than doubled due to construction. Today, eastward moving traffic is waiting six days, westbound traffic held up by seven days. The softening in the market comes after a $5/MT rally in the Atlantic since June, $3/MT in the Pacific

(See attached file: PR060825.xls)(See attached file: PR060825.pdf)

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