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September 22, 2006

Fundamentals supported stronger futures prices this week on further confirmation of crop declines in the Southern Hemisphere and strong export interest. The Australian Bureau of Agricultural and Resource Economics released production estimates forecasting a 35% production decline this year. Harvest prospects are also deteriorating in Argentina and Brazil. Optimism for elevated export interest was provided through a strong export sales report, a Moroccan tender for US durum and SRW, and an Iraqi trade team visiting the U.S., sparking rumors of sales.

Speculators provided bearish pressure through continued exodus from commodity funds on falling energy prices.

After two weeks of declining prices, the CBOT rallied 27 cents/bu. Both the KCBOT and MGE were up 19 cents from last week.

Basis prices are generally unchanged, or down slightly due to a small decline in interior transport costs. Interior cash prices stronger giving farmers a good selling opportunity.

Durum price range strengthened at both ends by 25 cents/bu ($9/MT).

Barge rates in a sideways pattern for the last 4 weeks. Rains have added some draft to the rivers. Corn and bean harvest is quickly approaching with export commitments at record levels. Minneapolis to NOLA at $36/MT, Cincinnati to NOLA $25/MT.

Barge companies have decreased "free" demurrage days from 5 to 3 and steepened penalties for longer wait periods. The added cost to the exporter is showing up in higher basis prices, especially SRW.

SRW premium to SW at 29 cents/bu (10/MT) from 14 cents/bu last week.

The spread between SRW and HRW cash values continues to tighten. Currently at 97 cents/bu ($36/MT)

Wide spread among PNW traders for low protein max SW premium, ranging from 25 cents/bu ($9/MT) jumped to 50 cents/bu for 8.5% max grain.

Ocean rates continue to surprise. Last week, fixture prices on the same route varied widely during a demand frenzy. The market has calmed somewhat. Rates fell off $1/MT in the Atlantic and rose $1/MT in the Pacific. Exporters in the Lakes are still having problems fixing vessels, driving rates up there significantly.

(See attached file: PR060922.pdf)(See attached file: PR060922.xls)

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