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December 1, 2006
(See attached file: PR061201.pdf)(See attached file: PR061201.xls)

Futures prices firmed in the two weeks since the last price report. Technical trading, end-of-month fund positioning, spillover strength from the precipitous rise in corn prices, as well as a strong Commercial Sales Report were credited with the strength in wheat prices. All basis prices are quoted over March futures prices. CBOT March delivery futures were up 27 cents/bu since the November 17th Price Report. The KCBOT was up 16 cents and the MGE up 17.

The International Grains Council Grain Market Report has left its winter wheat planted area forecast unchanged, calling for a 4% increase worldwide from last year and 8% in the U.S., but suggested that a decline is possible for North American spring wheat plantings, due to high corn prices.

While winter wheat crop conditions fell again in the NASS crop conditions report, weather this week should be beneficial. Last week, dry conditions prevailed on the Great Plains. While warmth promoted winter wheat growth in areas with adequate soil moisture, Oklahoma’s drought continued to harm plants. Thanksgiving Day brought 76 F (24 C) to Ponca City, Oklahoma and highs topped 70 F (21 C) as far north as South Dakota. Topsoil moisture reserves diminished across the Plains last week, but snow cover yesterday and today will help. Farther east, dry weather finally overspread the eastern Corn Belt, benefiting SRW plantings.

SRW basis premiums weaker on elevated boards deterring export demand. Export interest for HRW also fell on the futures jump this week.

HRW premium to SRW continues to climb with HRW cash nearbys 73 cents/bu ($27/MT) higher than SRW. SRW nearby cash premium to SW popped back up, but with freight rates out of the Pacific so strong, SW was still less competitive in the Egyptian tender last week. SRW FOB Gulf nearbys are 41 cents/bu ($15/MT) higher than SW Portland FOB.

Barge rates were mostly unchanged from two weeks ago. The upper Mississippi is closed for the winter, a week earlier than last year. The Minneapolis - NOLA rate finished $9/MT, 41% higher than November 2005. Rates on the Illinois (impacting SRW and corn) are generally even with last year. Rail rates in the secondary market continue to trade at a discount to the tariff rate. The tariff rail rate for Minneapolis - Portland at $1.15/bu, is even with last year while Minneapolis - Houston at $0.91/bu is 25% above last year.

Ocean freight rates moved back up again over the last two weeks. Capesize vessels, large ships not used for grain transport yet affecting rates of other size classes, hit 19 month highs on mineral demand and strong winter utility demand for coal and oil in Asia. Chinese iron ore demand and firm global steel prices were also supportive. Panamax rates from PNW origin were up $1/MT, as were routes in the Atlantic basin. Pacific rates are currently over 71% ($17/MT) higher than last December. Rates out of the Lakes are 90% ($35/MT) higher than last year, trading at wide spreads. Gulf routes remain equal to levels paid last year.

The dollar has plummeted to 14 year lows against the British pound ($1.96) and 20 month low against the euro ($1.31), positive for price competitiveness of U.S. exports. Experts are calling for a continued decline during December when the dollar tends to perform poorly against both the euro and the pound.

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