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Corn market bullishness

Historical Price Trends: best odds for the week of May 19, according to our
HPT page is for CME July Hogs. Over the most recent ten years, odds of 90%
for lower CME July Hog futures than where they closed on Friday of the
previous week by an average of 225 points. Please see the HPT page for the
complete list.

For The Week: for the week, July corn futures value decreased 6%, July
soybean futures value increased 1% and July CBOT SRWW value decreased by
4%.

For The Month: Thus far for the month of May, July corn futures value is
down 3.5%, July soybean futures value increased 4.9% and July CBOT SRWW
value decreased by 3.3%.

Technicals: For the short term trader, Allendale uses its own unique custom
Moving Averages to monitor price momentum, define key support and
resistance levels as well as advise where key pivot points are located when
bulls may turn bearish and bears to turn bulls. We also include last weeks
closing price for the weekly chartist as we draw closer to the end of the
week to anticipate the possibility for futures to have a positive weekly
close or if weakness is ensuing.

Farm Bill: Highlights of the House and Senate Farm Bill are found within
our Grain Fundamentals II page. Congress has passed the most recent version
of a new farm bill which has overriding powers of a veto by President Bush.
Interestingly enough the proposed farm bill has language which "require
electronic energy traders to provide an audit trail and record-keeping,
monitor for market manipulation, and increase financial penalties for cases
of market manipulation and excessive speculation."

Weather: private weather services suggest an available open window for
planting of corn and soybeans for the next five days. The region forecasted
is the Delta, through Missouri, Kansas, southwest Iowa and up through the
Dakotas. A similar forecast for the east cornbelt but for later next week.

Corn Fundamentals: the trade suggest its transitioning from planting
progress to emergence. Read next section below. Fundamentally futures
should be well supported by slow emergence and steady demand. Weather
patterns may be shifting from a steady stream of rains to something more
sporadic and allowing for better chance for planting progress. Floor
traders suggest corn plantings to be at a level of 75% planted vs a five
year average of 88% when NASS releases its update at 3 pm on Monday. We
view weather as supportive to futures but realize corrective breaks are
possible.

Corn Emergence: the trade suggest it is transitioning its focus more
heavily on corn emergence and less weight on the corn planting progress. If
it is the case, then the corn trade needs to be supportive to futures. The
May 11th corn emergence level is estimated at 11%. Dating back to 1999, the
highest percentage of emergence was 51 in the year 2000 with a five year
average level of 33% and ten year average of 32%. Typically for this
present week emergence usually gains 23% suggesting by NASS's next release
11% could become 34%. However historical research suggest by next Sunday,
corn emergence typically is 56%, none the less, still very much delayed.

New Crop Marketing: The total amount hedged as a percent of anticipated
2008 production is 25%. 6020 vs the Dec 2008 is key support, 5920 a trader
momentum shift point. The immediate technical trend remains range bound
6020 to 6350. Key resistance is the 5/09 life of contract high of 6554. We
will monitor and alert when to resume hedges.

Trade Posture: fundamentally Allendale remains bullish to July and December
corn futures based on continued demand and projections for tightening
2007/08 to 2008/09 stocks. Bearish to corn futures are the perceptions of
better planting conditions on favorable weather forecast and renewed ideas
of a June Planted acreage report which may exceed the March Planting
Intention report.

Observation: the five year average weekly exports for this time of year
suggest weekly wheat sales of near 9 million bushels, 40 million for corn
and 8 million bushels for soybeans. Only soybeans came close to its five
year average and likely supported by the continued Argentina farm strike.

Exports: corn exports account for 19% of the total 2007/08 use. with 16
weeks remaining in the marketing year, cumulative sales of 2.247 billion
bushels to all nations are 19% higher than year earlier levels and 26%
higher than the five year average. Based on the past 4 weeks ave weekly
sales the US is on pace to sell 2.407 bil bu vs USDA target of 2.5 bil bu.
Shipments of 1.735 billion bushels are 15% higher than year earlier levels
and 63% below the five year average.

New Crop Sales-Corn: The old crop marketing year officially ends on August
31. We have sold 99.2 million bushels of new crop corn to date vs 78.8 mil
bu a year earlier and 30.8 million bu for a three year ave.

Exports: soybean exports account for 36% of the total 2007/08 use. with 16
weeks remaining in the marketing year, cumulative sales of 1.069 billion
bushels to all nations are 3% better than year earlier levels and 15%
higher than the five year average. Based on the past 4 weeks ave weekly
sales the US is on pace to sell 1.202 bil bu vs USDA target of 1.09 bil bu.
Shipments of 936 million bushels are 2% lower than year earlier levels and
18% above the five year average.

New Crop Sales-Soybeans: The old crop marketing year officially ends on
August 31. We have sold 55.8 million bushels of new crop to date vs 40.2
mil bu a year earlier and 53.5 million bu for a three year ave.

Meal and Oil: with 38% of the marketing year remaining, Cumulative export
sales of soybean meal have met 76% of its marketing year target, 11% below
yr ago levels and 8% below its five year average. Cumulative export sales
of soybean oil have reached 74% of its target vs 63% year on year and are
4% less than its five year average.

Exports: wheat exports account for 54% of the total 2007/08 use of
production. It must be noted, typically exports account for 49% of annual
total use. With 3 weeks remaining in the marketing year, cumulative wheat
sales of 1.254 billion bushels to all nations are 41% higher than year
earlier levels and 26% higher than the five year average. Based on the past
4 weeks ave weekly sales the US is on pace to sell 1.292 bil bu vs USDA
target of 1.28 bil bu. Shipments of 1.144 billion bushels are 49% higher
than year earlier levels and 90% above the five year average.

New Crop Sales-Wheat: The old crop marketing year officially ends on May 30
which is at the end of the present month. We have sold 161.3 million
bushels of new crop wheat to date vs 36.8 mil bu a year earlier and a three
year average of 9.9 mil bu.

Soybean Fundamentals: The on going Argentine strike is supportive to
futures. The latest word is the farmers have extended the strike from
Thursday May 15th to Wednesday May 21st. This ongoing strike suggest
continued shifting interest away from the unsettled country to Brazil and
then the US for soybeans. The last two days of this week, China bought
319,000 tonnes of new crop soybeans and 60,000 tonnes of old crop from the
US. Of key interest is the old crop purchase from the US at a time when
China typically secures more immediate needs from Brazil and Argentina.
Soybean plantings are anticipated to be at a level of 25% planted vs 11%
last Sunday and compares to year earlier five year ave of 48% when NASS
releases its update at 3 pm on Monday.

New Crop Marketing: We will hold hedges of new crop at 40% of anticipated
2008 production and alert when to resume. A move to 13790 may warrant
additional hedging. Technical chart based support is 12850. The
intermediate trend is up. We will alert you when to resume hedges.

Trade Posture: technically Allendale remains bullish to soybeans as well as
fundamentally but with a degree of caution. If by chance Argentina's
government and its farmers come to a workable agreement, look for the
futures to trim the "Argentina" premium from futures. Allendale achieved
its objective on its long July soybean and soybean meal during Friday's
trade.

Wheat Fundamentals: harvest of the winter wheat crop has began in the state
of Texas and with mostly positive results as protein levels are running as
anticipated. Commercial grain companies are anticipating variability for
protein and yield for Kansas and Oklahoma. Pakistan has launched an
official tender for 250,000 tonnes of wheat and was expected. World
production of wheat is projected to be a record and end stocks to increase
14 million tonnes year on year vs an 8 million tonne increase from 2003 to
2004. Warming temps early to mid next week may stress southwest wheat in
non irrigated fields. Rains are expected late this week and weekend for
south and east Australia to benefit top soil moisture for planting.
Argentina wheat planting is in need of rain and some is forecasted only in
the southern regions this weekend and next week.

New Crop Marketing: Resistance is 7920, major support at 7630 and then 7210
vs July CBOT soft red winter wheat. We see no reason to hedge new crop
above the 65% level we have on for now. Allendale will alert you as to when
to hedge or sell new crop to the cash markets.

Trade Posture: of key significance is how both CBOT and KCBT July wheat
futures breeched its respective 200 day Moving Averages on Wednesday. Old
support now becomes resistance. Allendale is technically bearish to KCBT
and CBOT wheat and is a willing seller against technical resistance.
Allendale achieved its objective on its short MGEX July wheat, remains
short KCBT July wheat and pending orders to sell CBOT wheat.

Lean Hogs: This week may have been an important one in finally confirming a
peak in cash hog prices. We may also have a corresponding top in cash pork
prices. Cash hogs likely made their seasonal peak on Thursday we did not
see a lower close in cash pork until today. This ride had been wild while
it lasted. We could argue summer futures may be $2 to $3 overvalued here.
However, our real concern remains the October and December. We have a $65
price objective for December futures. We have been conservative with
speculative trading and recommended short $80 July calls for just over
$1.50. They settled at $1.50 today. For producers hold all hedges.

Sow Slaughter Slowing?: We will run this portion of last night's commentary
again. It is very important to monitor this key driver which will determine
2009 prices. Hog producers had been losing big money since October. With
the very large cash hog rally in April and early May recent marketings have
just been above breakeven levels ($81 on the lean basis which is what
futures trade). Will producers stop liquidation prematurely? We call
liquidation successful it remains over 10% higher (from year ago levels)
for two to five months. From the last week of March through fourth week of
May sow slaughter ran from 11% to 19% higher. The latest numbers released
Thursday, for the week ending May 3, indicate sow slaughter up only 1%. Is
this simply a one week aberration or the start of a new trend? For now we
have to assume it is only a one week deal. However, if it continues and
liquidation stops prematurely these large premiums on 2009 contracts will
need to be reduced.

Cattle on Feed: is called neutral to supportive. We would call June and
August to be up 35 cents on Monday and deferreds such as October and
December to be steady.

Feedlot Marketings: There was a surprise on the Marketing front. 10.7% more
cattle left feedlots in April than last year. That was above the average
guess of 8.4%. It is a clearly bullish number as it implies the number of
cattle carried over into May would be less than expected. In fact it was a
record number for any April since the current data series started in 1996.
It also implies feedlots did a good job in cleaning up the delayed
marketings from March. Making this very clear...this sounds like very good
news. However it does not jive with other information. If we marketed so
many cattle and cleaned up the delayed marketing problem then shouldn't
carcass weights have declined from the end of March to the end of April? At
the end of March steer and heifer carcass weights were a large 22 and 14
lbs higher than last year respectively. At the end of April, the week
ending May 3, those numbers were 22 and 18 lbs higher respectively. So in
essence steer weights did not change at all and heifer weights actually
increased. Does that sound like we cleaned up feedlots? This implies we
marketed so many more cattle than expected simply because we had so many
cattle to market, not because we cleaned up supply. It also implies
supplies were large in April and therefore may remain a little larger than
expected in May.

Feedlot Placements: USDA indicated we brought 2.0% fewer cattle into
feedlots than last year. That was a surprise as the average guess had been
for a 5.1% decline. In other words the industry expected feedlots to back
off buying new numbers sharply due to very poor margins. Instead they did
not decline as much. Cattle placed in April will finish out from late
August through November. This is slightly bearish August but mostly bearish
the October.

Cattle Supplies: The trade will call this report bullish and is giving out
Monday morning calls of 50 cents to $1 higher for nearby's. Since weight
data is not confirming the idea feedlots are cleaning up supplies we will
still assume plentiful slaughter levels through June and into July and
therefore keep our higher call for Monday morning limited to 35 cents. We
still expect slaughter levels to switch to below last year levels by
August. Instead of a sharp drop at that time perhaps it will be a little
more mild and therefore less bullish.

Cattle Pricing: Cash cattle started trading in Nebraska yesterday afternoon
at $2 higher dressed which was $150. As of this point on Friday we have not
heard of any more sales. We would expect trading to finish up later today
at the same $150 price traded on Thursday though. Live based action started
today from Kansas through Texas at $94 and $94.50. That was steady to 50
cents higher. From here on out the key will be daily changes in wholesale
beef prices. Buying for Memorial Day is now finished up. The only thing
left to hold this market up is hopes for South Korea buys as they
supposedly will start accepting US beef at some point later next week. For
speculative trading our favored December/June spread will narrow in against
us on Monday morning. It settled today at $12.12 this afternoon which is
still better than the $11 or so we have recommended entering it at. We
still feel our $15 objective is very reasonable.

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.

Historical Price Trends: best odds for the week of May 19, according to our HPT page is for CME July Hogs. Over the most recent ten years, odds of 90% for lower CME July Hog futures than where they closed on Friday of the previous week by an average of 225 points. Please see the HPT page for the complete list.

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