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January 19, 2007
(See attached file: PR070119.pdf)(See attached file: PR070119.xls)

Markets were highly volatile this week, rising on pressure from the corn pit and falling on fundamentals that included continued favorable weather in the US Plains. The Commitments of Traders Report depicts a tug-of-war between Index traders holding long positions and Commercials heavily short the market. From last week, CBOT SRW futures are down 13 cents/bushel, the KCBOT down 16 cents and the MGE down 9.

At 824,700 MT, this week's export sales were just short of a marketing year high. The big sales were anticipated, including a 100k sale to Iraq, but lots of small sales added up with the total exceeding expectations.

Global fundamentals: The el NiƱo, global warming combination has set the stage for damage to the European winter wheat crop next week. Overly mature winter plantings without protective snow cover are forecast to be hit with extreme cold. Government of India "conservatively" calling for a 74 MMT harvest, up 6 MMT from last year and the highest level since 2000/01. Continuing drought in North Africa is beginning to look severe.

Bipartisan support in the U.S. for ethanol production is making increased government support and use mandates very likely. With more corn going to refineries, more wheat will likely go into animal feed rations.

Basis prices unchanged this week. SRW/HRS markets ignored a barge rate increase.

HRW premium to SRW fell slightly to 77 cents/bu ($28/MT). Although SW fell by 10 cents/bu this week, the SRW nearby cash premium to SW is still negative. Strong sales out of the PNW are keeping SW prices elevated. SW is currently 23 cents ($8/MT) more expensive than SRW.

High water levels on the lower Miss. and Ohio Rivers forced barge operators to reduce capacity and travel slower, pushing barge rates up between 36 and 58%, levels last seen in October and even with January 2006. Traders reported that rates moderated later in the week. Rail rates remain mostly unchanged. Routes and rates include: Kansas City to Galveston (HRW) up 5% from last year at $23/MT; North Dakota to Houston up 2% to $48/MT and South Dakota to Portland down 3% to $42/MT (HRS/durum). Truck rates continue down on lower fuel costs.

Ocean freight in the Pacific came down $3/MT this week, counter to what market observers had expected. Demand for Panamaxes in the Pacific on period charter has completely dried up, handymaxes are doing a bit better. Rates in the Atlantic basin were unchanged after a $2/MT increase last week. Rates from the St. Lawrence Seaway should be considered nominal with the last wheat shipment dating back a month. Rates in both the Atlantic and Pacific are now about 50% higher than year-ago levels.

USDA Grain Transportation Report feature article on wheat shipments to Japan, comparing costs in the second and third quarters of 2006, shows rail transport declined slightly while ocean freight was 26% more expensive in the third quarter.

Commitments of Traders Supplemental Report:

USW Commercial Sales Report:

USDA Grain Transportation Report:

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