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September 29, 2006

After a big rally last week, funds took the markets up again this week. Export traders have the sense that this is an "artificial high," but with literally every major exporting country except Canada short on wheat, the bulls believe importers must be uncovered in the deferred months. CBOT nearbys were up 24 cents/bu (after climbing 27 cents last week), KCBOT was up 15 cents/bu and MGE up 8 cents from last week.

SRW basis prices much stronger due to a strong CIF market. With a large increase in cost of barge demurrage, the CIF/FOB spread has widened and liquidity of SRW for export has declined considerably.

HRS basis prices unchanged, still lacking EU buyers. Exports from the Lakes are hampered by lack of vessels.

Barge rates stayed somewhat rangebound for the 5th week. The corn and bean harvest is gaining speed, could take already very firm rates up further. Rates on the Illinois saw the largest move this week, rising $2/MT. Minneapolis to NOLA at $37/MT compared to $34/MT this week last year (after 2 hurricanes caused rates to double), Cincinnati to NOLA $25/MT compared to $30/MT last year.

Rail rates are down considerably from last year when hurricanes forced traffic from barge to track. November cars are trading $859/car ($9.50/MT) less than last year. Rail lines continuing to increase their "fuel surcharges," up 32% from last year and up 3% from last month, despite fuel price decline.

Durum price range weakened on both ends as the Canadians market a monster harvest. Lower end down 27 cents/bu to $5.31/bu ($195/MT), highest quality grain selling as high as $5.72/bu ($205/MT).

USDA Small Grains Summary revised SW production down by over 800,000 MT (10%). Prices did not react strongly as PNW traders had expected the revisions.

SRW premium to SW unchanged at 28 cents/bu ($10/MT).

The spread between SRW and HRW cash values continues to tighten. Currently at 75 cents/bu ($28/MT)

Ocean rates were mostly down this week. Routes originating in Gulf and St. Lawrence declined by $2/MT, Pacific routes were unchanged. The Lakes remain extremely strong on a supply shortage, now competing with corn. Duluth origin rates are $1/MT higher.

(See attached file: PR060929.xls)(See attached file: PR060929.pdf)

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