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Big supply pressures corn prices

As the 2006 harvest gains momentum, corn supply from Sept to
the Jan annual report has grown 90% of the past ten years.cted to continue to
press futures lower. However, strong domestic and export demand and
extremely tight world stocks of corn and wheat may not keep the falls low
from consolidating very long before an anticipated explosive first 4-5
months of 2007.

Historical Price Trend: As the page had suggested last Friday, 100% of the
time for this week over the past ten years, corn finished an ave of 10
cents lower. This week did finish lower by five and one quarter cents. Next
weeks odds are 70% lower.

Weekly Export Sales: 2006-07 corn export sales have already have reached
22% of USDA's export target vs 17% for the five year ave. The 2006-07
marketing year have found corn sales reaching 496 million bushels vs last
years 310 mil bu and a previous three yr ave of 303 mil bu. China remains
out of the export picture. Its first 8 mths of 2006 have limited export
sales to a mere 2 MMT, down 65% vs the first 8 mths of 2005.

Argentina: the USA's #1 corn export competitor is Argentina. They are
planting and scheduled for harvest beginning in March. Estimates released
Thursday a corn crop of 17.78 MMT vs last years 14.5 MMT. Yes that is how
the world can respond to high prices, with enthusiasm.

Corn End Stocks to Use: Projected end stocks to use now at 10.2% vs 9.4% in
2003 for the domestic situation. Globally a level of 11.5% vs 2003's 14.3%.
Projected world end stocks for 2006-07 now 92 MMT vs 103 in 2003! Lets go
back to 1983 to find smaller stocks of 89 MMT!

Cash Corn: it is the March-April time period when the National corn price
average more often than not finds its calendar year peak price dating back
to 1998. For the end user it is more often in the Oct-Nov time frame when
prices reach low levels to lock in long term needs. Feel free to contact
your Allendale representative to discuss your cash corn marketing plan as
an end user or producer.

LDP: details presented in Wednesday's Allendale Wrap-Up concluded both
the 6 and 7 year LDP average peak for corn has been Oct 11th while soybeans
finds its peak in a range of Oct 14th through the 27th. You will find the
complete table just before the soybean comments.

Five Year Ave Cash Price: the five year ave cash price for corn for the
month of Sept $2.13, month of Oct $2.05, month of Dec $2.11.

Corn Technicals: Dec futures close is 2416 vs last Friday's 2460. Our key
custom Moving Averages are 2410, 2420 and uses a 2580 bear to bull pivot
point. March futures close is 2554 vs last Friday's 2600. Our key custom
Moving Averages are 2560, 2560 and a 2670 bear to bull pivot point.

Trade Position: We remain short both Dec and March corn futures based on
new crop harvest seasonal tendencies, heavy old crop stocks. However we
remain long term very bullish from a yet to arrive projected Oct July
futures low into a late winter, early spring high based on our research in
years when projected global and stocks to use are abnormally tight.

Crop Maturity: The weather forecast calls for a frost freeze for Tues-Wed for the
northern tier of grain states. According to the very latest crop maturity
reports, Nebraska soybeans could be at the greatest risk.

Allendale Inc was able to make contact with many of its clients within
the states. Despite the potential for a frost
freeze for next week, the overwhelming majority of the farmers suggest they
do not anticipate any significant damage. Further more a crop specialist
from Iowa had the following to offer- "The majority of the soybean crop is
currently in the later half of the R6 stage ranging 90 to 95% dry matter
accumulation; about one week from reaching the R7 stage. R7 stage is
defined as one pod on the main stem with a mature brown color. When R7
stage is reached, a plant is considered to be at physiological maturity,
100% dry matter accumulation. A killing frost in one week would be
insignificant for the majority of the soybean crop in NE Iowa. A small
percentage of fields are currently in the early R6 stage. By next week
they would be in the later R6 stage, 90 to 95% dry matter accumulation. A
light frost next week would be insignificant, a heavy frost may cause a 5%
yield reduction, and a killing frost may cause a 10% yield reduction in
these fields."

Even though physical damage from a frost freeze may be minimal, we can
not rule out the potential for funds to attempt to rally both corn and
soybean futures.

Cash Peaks and Valleys: Completed research on the timing of cash corn,
beans and wheat prices when beneficial for end user and for producer. We
have concluded that it is the March-April time period when the National
corn price average more often than not finds its calendar year peak price
dating back to 1998. For the end user it is more often in the Oct-Nov time
frame when prices reach low levels to lock in long term needs. Feel free to
contact your Allendale representative to discuss your cash corn marketing
plan as an end user or producer.

For wheat, research suggest cash price peaks in two time periods of
the calendar year. The first is the Oct-Dec time frame and then again in
April to month of May. Most obvious when looking back to the year 2000, end
users could benefit in the month of July.
For Soybeans, research dating back to the year 2000 has two time
periods which could benefit the end user as a result of harvest in North
America and then South America. The research suggests cash price lows
concentrate in the Oct-Nov and Jan-Feb time frame. For soybean producers,
the research suggests if you have to identify the one time period when
history has shown cash price highs it has been the month of August.

Cash Prices Help: Another area the farm producer of corn and soybeans may
want to use the research above for is to help to identify the period of time
when to utilize a 60 lock on Loan Deficiency Payment of actually take the
LDP. When looking at the research above it may come as little surprise when
the 60 day lock or LDP should have the producers greatest attention.

For corn, the peak LDP in 2005 occured Nov. 1 at $0.51, the 5-year average is Oct.. 17 at $0.28. For soybeans, the 2005 peak occured on Oct. 12 $0.05, with the 5-year average Oct. 14 at $0.47.

Soybean Fundamentals: Heavy old crop stocks and beneficial, timely rains
for 2006 soybean production remain bearish to new crop futures. Demand for
2006-07 received a shot in the arm as export sales are off to a very
aggressive start for the 2006-07 marketing year.

50-50 Odds: from the Sept USDA crop report to the January annual report,
odds are not nearly as impressive as corn over the past ten years. Odds
that soybean production could increase are only 50%.

Brazil: Recent soil moisture maps do indicate recent rains are helping to
alleviate dry weather conditions in southern Brazil. Key central and
northern conditions remain dry which is not unusual for this time of year
but rains will need to fall very soon in order to repair dry top soils
before planting begins in earnest. Keep your best eye on Brazil and second
eye on wetter than average fall harvest conditions for the west grain belt.

Soybean End Stocks to Use: Projected domestic end stocks to use are now
17.4% vs 16.9% last year and 7.6% from 2000-2004 ave. Globally a level of
18.1% vs 19.3% last yr and 15.3% from 2000 to 2004 ave.

Five Year Ave Cash Price: The five year ave cash price for soybean for the
month of Sept $5.52, month of Oct $5.53, month of Dec $5.61.

Soybean Technicals: Nov futures close is 5496 vs last Friday's 5480. Our
key custom Moving Averages are 5490, 5500, and bear to bull pivot point at
6060. January futures close is 5624 vs last Friday's 5616. Our key custom
MA's are 5590, 5600 and bear to bull pivot point at 6130.

Trade Position: We were stopped out of our short Jan soybeans for as
scratch trade and have orders to re sell Nov beans on a technical based
short covering rally. Increasing yields and heavy old crop stocks
domestically and globally and the technical downtrend are the driving force
behind our bearish posture towards the soybean futures.

Wheat Fundamentals: Projected global stocks for 2006-07 are tight. US
projected wheat stocks are tight at 429 mil bu positioned in between some
of the tightest levels of 377 mil bu in 1995 and 444 million bu in 1996.
Argentina wheat country remains dry and threatens to further reduce
projected global stocks of 126 MMT. You would have to venture back to
1981's 113 MMT to find tighter stocks.

Odds from Sept to Jan: Odds have been 70% over the most recent ten years
that USDA lowers wheat production in the Jan annual crop production report
vs its Sept report.

Export Sales Are Hurting: When the US places nearly 50% of annual use on
exports and they are performing poorly. Price is reacting accordingly.
2006-07 export sales are now 22% behind last years pace and at only 339 mil
bu, they pale in comparison to the previous three yr average of 463 mil bu.

Wheat Technicals: DECEMBER CBOT SRWW futures close is 3924 vs last Friday's
4154. Our key custom Moving Averages are 3960, 4080 and 4030. DECEMBER KCBT
HRWW futures close is 4624 vs last Friday's 4802. Our key custom Moving
Averages are 4640, 4730 and 4740. DECEMBER MGEX spring wheat futures close
is 4422 vs last Friday's 4616. Our key custom Moving Averages are 4590,
4590 and 4580.

Trade Positions: The Iraq wheat buying team may be in town next week and
allow futures to retrace but Australia is very much in the hunt to sell the
big ticket wheat tender. We have limit orders to sell corrective short
covering rallies in the KCBT, CBOT and MGEX wheat for a short term
position, but like corn anticipate a bull rally early in 2007.

Five Year Ave Cash Price: the five year ave cash price for SRWW for the
month of month of Sept $3.43, month of Oct $3.51, month of Dec
$3.51.

Allendale Lean Hogs: Packers finished this week with a huge 2.123 million
head kill under their belts. That is the largest kill since mid December
and a large 4.9% larger than last year at the same time. This is part of
the normal plan of low slaughters in the summer and the peak kills still to
come. That big kill has put some pressure on wholesale prices but not as
much as you would think. For the week the pork cutout is down only $1.46.
With today's CME rebound October futures closed down 55 cents. The main
point we will note here is these big kill levels are not causing drastic
breaks in prices. This reinforces our view that October futures have more
than enough discount to cash hog prices already. In recent days there has
been attention focused on reports of rising weights.

The most recent
Iowa/Southern Minnesota weekly weight report indicated live hog weights on
Sep 9 at 264.2 lbs which would be 2.1 lbs over last year. The week before
that report had weights .8 lbs over last year. That is a pretty large jump
for only one week of change and would imply hogs backed up waiting to be
marketed which is bearish. However, we would rather wait until the report
on national weights is released for that time frame next week before making
a judgement. Additionally with this week's huge kill it is likely any
thoughts of hogs backing up are not realistic. We may have cleaned up
thoughts of delayed marketings. We noted yesterday there was an upside
target on the charts left from Thursday's trade. That was filled today and
the market closed strong after filling it, a supportive sign.

Allendale Live Cattle: The CME trade certainly took news of declining cash
cattle prices pretty well. Active trade in the central and southern plains
occurred at $88.50 with talk of some $89's moving. That would be $2.50
lower than the bulk of last week's action which averaged $91. For the week
cash cattle fell $2.50, choice boxed beef was down $3.98, select boxed beef
was off $3.08, and October futures fell $1.17. Near term we will note
fundamentals are bearish. This week's kill was only 1.2% higher than last
year and wholesale beef prices still fell. In the two previous weeks the
kill was 2.3% and 7.3% larger. Though much of the trade has jumped to the
bear side recently we still feel the current break is a short term break in
an overall long term up trend. Our long term upside price target is still
for the February futures to reach $94. The models do not suggest that
objective being filled until the end of the year though.

Allendale is registered with the CFTC and NFA and is a member of the NIBA.
The bottom line is we are a regulated firm which can be extremely important
in this day and age.

As the 2006 harvest gains momentum, corn supply from Sept to the Jan annual report has grown 90% of the past ten years.cted to continue to press futures lower. However, strong domestic and export demand and extremely tight world stocks of corn and wheat may not keep the falls low from consolidating very long before an anticipated explosive first 4-5 months of 2007.

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