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October 27, 2006

(See attached file: PR061027pub.xls)(See attached file: PR061027pub.pdf)

Futures prices mixed this week with nearbys at the CBOT up 4 cents/bu, the KCBOT down 3 cents and MGE down 2 cents.

The 400 TMT sale to Iraq was more of a confirmation than a surprise as it had been expected since the first set of tenders for 300 TMT earlier this month. The remaining question is from which coast it will be exported. Some percentage is thought to be PNW origin.

HRS sales* languish with sales to the EU off 70% from last year due to high freight rates from the Lakes and some phyto issues. HRS sales to the EU-25 are 550 TMT off of last year's pace, comprising most of the 750 TMT total HRS export deficit.

HRS FOB Duluth currently at a 25 cent/bu discount to SRW FOB Gulf, the highest level since January 2002.

Basis premiums for HRS and HRW off substantially this week with strong futures severely limiting export interest. SRW basis is up on continued exports, especially for nearby deliveries.

HRW nearby cash values currently 46 cents/bu ($17/MT) higher than SRW, down from 56 cents/bu last week.

Soft wheat spread: SRW nearby cash premium to SW stable this week at 46 cents/bu ($17/MT).

Durum price range nominally unchanged this week as domestic mills have bid the price above levels of competing supplies. Lakes program still at $5.72/bu ($210/MT) to $5.99/bu ($220/MT).

Barge rates fell substantially this week as grain producers are slow to sell and domestic millers are reportedly well-covered. Rates on the Ohio fell 38%($12/MT) from earlier this month and 12%($5/MT) below year ago levels. The Mississippi routes are down $9-10/MT, 22-42% off early October 2006 rates.

Ocean freight markets continued down for the third week as rates are falling about 20 cents/MT every day. Fundamental traders cite Eid al-Fitr, the post-Ramadan holiday, and a coal and steel conference for weakened demand. Undoubtedly, very strong grain prices are also causing a drag on trade. At $37/MT this week, the PNW-Japan rate is $9/MT, 33%, above this week last year. The Gulf routes are at nearly the same levels as last year, while the Lakes are 55% higher than last year.

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