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Bullish corn market continues

Bullish to corn are the underlying fundamentals of good
global demand for corn and shrinking stocks from both the corn and wheat.
Solid exports for the start of the 2006/07 marketing year and ever growing
ethanol demand in the USA. Bearish to corn is high domestic cash prices
cutting into the cattle and poultry markets bottom line and Argentina corn
crop responding to high futures prices. In the background the investment
funds are keenly aware of the crude oil weakness and role which it could
play against ethanol profit margins. Technically the market was able to
hold key short term MA's of 3551 vs Dec futures and 3660 vs the March
futures. Long term we remain bullish.

Exports: weekly corn sales exceeded pre release trade estimate and at 54.9
million bushels bettered the 5 week ave level of 49 mil bu and 10 week ave
of 44 million bu.

Broiler Egg Set: this next section is becoming a very serious problem for
corn use. Broiler egg set was down 3% vs year ago levels for the same week
of the year. Over the last four weeks, egg set has been down 3%, down 2%,
down 3% and now this week's latest down 3%. Why is that important? Because
poultry is the largest consumer of soybean meal and 2nd largest user of
corn when analyzing the feed use sector of the monthly WASDE reports. Eggs
in incubators for broilers are now 204,107,000 vs 205,627,000 at the
beginning of October and 210,900,000 one year ago for this week of the
calendar year. Broiler chicks placed are now 161,152,000 vs beginning
October's level of 164,837,000 and yr earlier levels of 165,141,000.

Cash Corn: The Dec-Mar corn spread is at 15.2 cents carry. At $3.38 spot
cash prices, the cost of carry is 4.1 cts per bu per mth or 12.5 cents.
Anything less than 12.5 is a warning flag to move cash corn. As you work
through your harvest, you might have a much better idea if there is
sufficient storage on farm. If not, we would strongly advise to sell
surplus bushels into the cash market when the spread strengthens to 12.6 or
more. We fully anticipate futures and cash to work higher into the
March-April time frame.

Corn Technicals: Dec futures close is 3552 vs last Friday's 3432 and up
10.7% thus far in the month. Our key custom Moving Averages are 3510, 3510
and uses a 2710 bull to bear pivot point. March futures close is 3704 vs
last Friday's 3594 and up 10.7% thus far in the month. Our key custom
Moving Averages are 3660, 3660 and a 2820 bull to bear pivot point.

Trade Position: our we are willing buyers of corn futures but on a pull
back. Tight world stocks, no next new supply of corn until Argentina
harvest in March 2007. We remain aware of the fact of early warning signs
of economic rationing as outlined in the poultry section above.

Ethanol: Technically ethanol is immediately trading sideways and
intermediately trading higher. Key technical resistance is 2.09 per gallon
while key support is 1.958 per gallon, tonight's close 2.085. Fundamentals
are bullish if you are processing ethanol as there remains positive profit
margins, even with $3.30 per bushel feedstock input and $110 per tonne DDG
by product feed. However in the background we are very aware of the
building stock levels of ethanol. The very latest Energy Administration
data has monthly production of 10.2 million barrels vs 8.1 a year earlier
and stock levels of 9.2 million barrels vs yr earlier levels of 5.2
million!

Soybean Fundamentals: Argentina soybean farmers are gearing up for
record soybean production of 42.5 MMT. Last year Argentina produced 39 MMT.
In this months WASDE report, the USDA estimates the 2006/07 Argentina
soybean crop at 41.3 MMT. Just to the north the range of estimates for the
Brazil soybean crop production in 2006/07 is est at 53 to 58 MMT against
last years production of 55 MMT. It is not surprising to see Argentina
working on soybean production which is 75% the size of Brazil's crop. The 6
to 10 day weather forecast for Argentina is mostly dry. Presently it is the
center west region which is drying after missing a sure rain on Thursday.;
Forecast suggest the next best chance is Nov 30-Dec 1. Talk out of number 1
producing state of Mato Grosso Brazil is planted acres may be down because
of a lack of seed and other important supporting supplies. However acres
are expected to be higher in Parana and Rio Grade do Sul mainly because of
good moisture, something that has been absent the last two years.

Cash Soybeans: The Jan-Mar futures spread is 12.2 cents. With the spot cash
market at $6.26 per bu, cost of carry per mth is 6.5 cts/bu/mt or 13 cents.
If the cost of carry is below the spread, it signals to move soybeans to
the cash market. Use this present rally to sell any small overages which
will not fit into your on farm storage.

Exports: Weekly net sales of 27.8 mil bu are better than the 5 week ave of
26.4 mil bu but below the 10 week ave of 30.3 million bu. Please see our
Export Demand page to see how sales AND shipments were positive enough to
trim the amount needed on a per week basis to meet USDA final export target
of 1.145 bil bu.

Soybean Technicals: Jan futures close is 6604 vs last Friday's 6624 and up
2.4% thus far in the month of Nov. Our key custom Moving Averages are 6640,
6610, and has bull to bear pivot point of 6120. March futures close is 6726
vs last Friday's 6744. Our key custom MA's are 6760, 6720 and bull to bear
pivot point of 6200.

Trade Position: We are willing buyers of soybeans on a technical pullback
and as long as corn futures continue to stay in its up trend. We did buy
soybean meal futures late last week, March soybean futures Monday and Jan
soybeans on Wednesday.

Wheat Fundamentals: The sour taste in the wheat trade is mainly the fault
of miserable weekly export sales. What is so grating about the weakness in
sales is the fact you have the Ukraine all but removed from the export
picture as well as Australia. And can the US find a way to attract world
demands attention, not yet. Positive news is how Japan did buy a much more
normal amount of wheat in its weekly tender of 125 K tonnes and announced
today it will seek 170 K tonnes next week but the floor trade sentiment
towards the tender is it is routine business and not influential to CBOT
wheat futures as the tender excludes CBOT's SRWW but could offer some
support to the MGEX and KCBT wheat futures. Of the 170 K tonne tender, the
USA share is expected to be 90 K tonnes and the balance split between
Canada and Australia.

Exports: Sales of 11.9 mil bu are weaker than the five week ave of 20.1 mil
bu and 18.6 mil bu ten week ave. Neither the sales or shipments were enough
to help trim the amount needed on a per week basis to meet USDA's final
export target of 925 mil bu. The nastiest part of the whole debacle is how
the present sales pace thus far this marketing year suggest final exports
of 676 mil bu.

Cash Wheat: The Dec-Mar CBOT spread is at 20 cents carry. At $4.30 spot
cash prices, the cost of carry is 4.9 cts per bu per mth or 14.7 cents.
Anything less than 14.7 is a warning flag to move cash soft wheat. The
Dec-Mar KCBT spread is at 14.2 cents carry. At $4.60 spot cash prices, the
cost of carry is 5.1 cts per bu per mth or 15.4 cents. Anything less than
15.4 is a warning flag to move cash hard wheat. The Dec-Mar MGEX spread is
at 16 cents carry. At $5.35 spot cash prices, the cost of carry is 5.7 cts
per bu per mth or 17.2 cents. Anything less than 17.2 is a warning flag to
move cash spring wheat.

Wheat Technicals: DECEMBER CBOT SRWW futures close is 4740 vs last Friday's
4804. Our key custom Moving Averages are 4780, 4840 and 4940. DECEMBER KCBT
HRWW futures close is 5152 vs last Friday's 5086. Our key custom Moving
Averages are 5170, 5170 (key resistance) and 5240. DECEMBER MGEX spring
wheat futures close is 4960 vs last Friday's 4972. Our key custom Moving
Averages are 5010, 5020 and 5040.

Trade Position: We remain long MGEX, KCBT and CBOT July wheat futures.
Tight world stocks, shrinking Australia crop and no new supplies until
India begins to harvest next March are all bullish to wheat futures.
Technicals are bearish as all three Dec old crop contracts remain in a
downward trending channel. New crop July wheat futures are expected to
sensitive to winter kill stories throughout the world in the coming months,
unlike the old crop Dec wheat futures which are reacting accordingly to
poor export sales performance.

Allendale Lean Hogs: Weights are starting to creep back up. Weights always
increase from August into early December simply on cooler weight making
better daily gains. However, the key to watch is weights compared with last
year. Marketings in October were as much as 3 lbs lower than last year.
Currently they are running even if not back to a little higher.

Packers are
bought up into early next week and the plant slowdowns for the holiday will
not help the producer's case. Also, the largest plant in the nation, the
Smithfield Tar Heel plant which can run 32,000 head per day had labor
problems yesterday and today. That could push a few head into next week if
the kill line was slowed down. With that in mind cash hogs may remain weak
most of next week. Having said that we have to note packer margins may be
getting too good to pass up. Wholesale pork prices, measured via the pork
cutout, closed up 5 cents for the week. Cash hog prices however, were
steady to lower every day. With that in mind cash hogs may be weak next
week but December futures may be sideways. Futures are only trying to guess
where cash hogs will be on the 14th. By that time these better packing
margins could bring cash hog prices back up.

Allendale Live Cattle: It appears we have a slight backlog in market ready
cattle right now. That is our consensus from near term fundamentals and
today's Cattle on Feed report. There are two groups estimating cattle
slaughter in USDA. At the end of each month the Economic Research Service
puts out an estimate of total cattle kill for that month and estimate
numbers by class. At the end of October they estimated steer and heifer
slaughter was up 4.0% from last year. Just about all private market
analysts use this number to make a guess for the Cattle on Feed marketing
number.

A separate branch of USDA puts out the Cattle on Feed report. They
survey feedlots and make a guess at feedlot marketings. Friday, they
estimated a 1.8% higher number for October. That discrepancy has traders
concerned maybe there is a backlog in feedlots. Last week's total cattle
ended up 7%. This week's total cattle kill ended 9% higher. The trade may
believe feedlots have the numbers to keep this up for a little while longer
and therefore it is bearish.

This extra beef hitting recently has broken
wholesale beef prices. Choice boxed beef was down $4.32 while select beef
prices were down $1.73 for the week. We would like to argue bulls will
regain control right now but the numbers are not supporting that. With the
break in beef and the higher fat cattle trade that happened this week
packers should be fighting tooth and nail on cash cattle next week. In the
longer term the trade will be impressed with the 13% decline in placements
noted for October. The average guess for today's report was for an 8.5%
decline in placements. The net result was total number of Cattle on Feed as
of November 1 was estimated at 4.2% larger than last year. You may hear
market analysts raise concern over 120 day numbers. Based on the
information on today's COF report pundits can estimated the number of head
that have been on feed for over 120 days which is considered market ready.
We can't join that bearish bandwagon however. With so many placements this
year favoring younger calves and feeders you have to expect the 120 day
number to balloon. The only thing the trade should be concerned about is
when they will hit. Our models suggest that will be the first quarter of
2007. One positive factor for fat cattle prices is the fact placements will
be lighter than usual for a couple more months. That could keep the
pressure limited to the first quarter with lighter slaughters hitting the
second quarter.

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.

Bullish to corn are the underlying fundamentals of good global demand for corn and shrinking stocks from both the corn and wheat. Solid exports for the start of the 2006/07 marketing year and ever growing ethanol demand in the USA. Bearish to corn is high domestic cash prices cutting into the cattle and poultry markets bottom line and Argentina corn crop responding to high futures prices. In the background the investment funds are keenly aware of the crude oil weakness and role which it could play against ethanol profit margins. Technically the market was able to hold key short term MA's of 3551 vs Dec futures and 3660 vs the March futures. Long term we remain bullish.

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