CENTRAL CITY, Neb. (Dow Jones)--Corn prices surged to 10-year highs this
week, even as wheat lost 1%-3% of its cash value. Spot soybean markets were
firm.

   CORN


  National average cash corn prices topped $3.75 for the first time since 1996
this week, as an appreciation of 3/4 cent in average interior basis only added
to gains of 10 1/4 cents in March CBOT futures.

  "The problem that's developing for the market is we are seeing stocks decline
at a time when domestic and world demand is forecasted to explode due to
(increasing) ethanol production," said analyst Bob Utterback.

  The USDA currently estimates that domestic corn supplies will fall to a
minimal 752 million bushels by fall.

  Fears of tightening pipeline supplies also supported corn basis this week, as
did a decline in country movement, associated with severe winter weather.

  "Icy roads hindered trucks in many areas of the Midwest, as some of the
coldest temperatures of the season settled in on the Corn Belt," said Bryce
Knorr of Farm Futures.

  Average daily deliveries of cash corn to primary Midwestern terminals polled
by the CBOT were reported at 16% less than a week ago, despite an intervening
50 cent-per- bushel rally in prices.

  "They (producers) seem to be content to sit back and watch for fireworks,"
said an Indiana grain merchandiser.

  Cash corn basis also improved by 5-6 cents at U.S. Gulf ports, largely in
response to strong demand for U.S. corn on the world market, which had export
sales/shipments up 21%-24% this week.

  "That's a strong indication importers aren't backing away from buying corn,
despite the price rise," said Chip Flory of Pro Farmer. "Before this rally is
over, importers will have to back away from the corn market. The only way
they'll back away, is if prices rise far enough to chase them out of the
market...and I don't think we're there yet."

   SOYBEANS


  Fears that the high-flying corn market may draw an excessive amount of
acreage away from soybeans served to support that sector this week, leaving
interior basis and Mar CBOT futures each up by about 1 cent as of Friday.

  Bullish demand influenced soybean basis, with the National Oilseed Processors
Association on Tuesday reporting December soy crush at 149.16 million bushels,
up nearly 1 million bushels from November. NOPA also said national soybean oil
stocks were surprisingly small, at only 2.6 billion pounds.

  "Soyoil stocks have leveled out in recent months after climbing steadily the
past two years," said Ag Management Services market consultant Rich Balvanz.
"The promise of biodiesel may be starting to pay off - at least enough to
offset the shift away from trans-fat oils in human food."

  Daily average spot soybean sales at CBOT-surveyed sites also dipped 28% this
week, but failed to stem a 4- to 5-cent decline in CIF soybean basis at the
Gulf.

  "There are simply too many old-crop soybeans still in the bin to make the
market pay up for them at this point in the season," said Farm Futures analyst
Arlan Suderman, who points out that USDA increased its forecast of soybean
ending stocks to an all-time record high of 575 million bushels just last week.


   WHEAT/OATS


  Although interior and export basis for wheat registered a broad rally, those
gains were more than offset by a notable decline in wheat futures, thereby
cutting cash values by 2%-3%. Mar CBOT oats also closed with 3-cent losses on
the week.

  Specifically, cash contracts declined by 12 1/2 cents for soft red winter
wheat futures, 16 cents for HRW and 9 cents for HRS wheat.

  "Crop-friendly moisture in the U.S. winter wheat growing regions weighs on
futures prices," said analyst Alan Brugler. "News of Pakistan's intentions to
export 450,000 tons (16.5 million bushels) of wheat added some sell pressure."

  Domestic wheat basis averaged 2 3/4 cents stronger for SRW, 2 cents better
for HRW and 1/2 cent higher for HRS.

  "HRW now pencils in as a feed ingredient to the western (cattle) feedlots,"
said Man Financial.

  Additional support for interior basis came from a general reduction in farmer
selling, coinciding with the decline in cash prices.

  "Lack of cash movement is sustaining basis levels," said Country Hedging
wheat analyst Ami Heesch. "Trade action was subdued, with country selling
targets above the market and limited commercial activity."

  Export basis climbed 6 cents for SRW, 1-3 cents for HRW and 1 cent for HRS
this week, a period in which USDA said export sales of U.S. wheat more than
tripled.

  "Each of the grains saw some of their best export sales numbers of the entire
crop year," noted A.G. Edwards analyst Bill Nelson.

   CROP WEATHER


  The Joint Ag Weather Facility at USDA said mixed precipitation - rain,
freezing rain and snow - had developed across western Texas Friday, in advance
of an approaching storm system. Snow showers were also affecting areas of the
Midwest, downwind of the Great Lakes.

  Dry weather and generally seasonable temperatures prevailed elsewhere,
maintaining a protective snow cover for winter wheat in much of the Great
Plains.

  "Some lowland flooding continues in the eastern Corn Belt, where fields are
generally muddy or partially frozen," noted agricultural meteorologist Brad
Rippey.

  JAWF forecasters said "a vigorous storm over the Southwest will continue to
strengthen, triggering heavy snow in the southern Rockies and southern Plains,"
over the next few days. Freezing rain and sleet are also expected to fall from
West Texas to the Ozark Plateau, renewing delays in grain transportation.

  Weekend snow will also spread over the central Plains and Midwest, while
freezing rain and snow impact grain trade in portions of the Mid-Atlantic
region. Rain will also spread across the Gulf Coast and southern Atlantic
states.