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Corn planting delays may mean more soy acres

Bullish to corn is less than ideal conditions to begin a
active planting campaign for 12 million more acres than last year.

The recent dip in prices which has brought renewed demand
for domestic and export sectors, the perception of heavy flooding damage to
Argentina corn and soybean crops and potential for frost-freeze in the
major Midwest this coming weekend. Bearish to corn is the threat of a 48%
bigger corn crop from #2 corn exporting country of Argentina, 6-8 million
tonnes of corn exports from Brazil's immediate harvest and new winter corn
crop exports which could exceed 4 MMT.

6-10 and Two Week NWS Forecast: the six to day and two week rain forecast
predicts a potential break for the central Midwest but above normal rains
for the northwest and east central Corn Belt, bullish to corn and the
lengthier the planting delays, eventually bearish to soybeans. Allendale's
research suggest the likelihood of the first planting progress report for
2007 may not materialize until Monday April 26th.

Tuesday's WASDE Report: Allendale suggests a slight increase in 2006-07 corn
end stocks to a level of 767 mil bu vs March's 752 mil bu, predominantly
from a little less corn for feed and increase in feed-wheat use, and the
weaker export sales and shipments as of late. However end stocks of 767 mil
bu remain well under the previous years 1.967 billion bushels.

Old Crop Corn: We exited our long May 270 calls near 12:30 pm Wednesday.
These options will expire on April 20th, we are two days away from a three
day weekend. If we were to walk back in on Monday morning and have found
weather forecast calling for a better weather outlook, these calls could
lose value. There is technical resistance above and with Wednesday's
futures rally we decided to take action. These calls covered 66.6% of the
80% of old crop corn hedged. In essence the gain was 59 cents and
ultimately served the purposed intended and that was to protect the hedges
in the case of a winter rally.

Trade Posture: This recent price break benefits end users. The supply and
demand picture for 2007-08 suggests smaller end stocks vs 2006-07 levels and
volatility is expected to remain on high alert. With this price break, sub
$4.05 cash corn is likely to inspire existing ethanol plants to secure
profitable supplies and more importantly those under construction to get
into the game on a quicker note and provide the stimulus for planned plants
to also take action. The funds were in shock by the tree (acreage) but with
prospects of planting delays in the spring, thoughts of a summer La Nina,
and finally the forest (2007-08 end stocks) smaller than present old crop
stocks, we remain long term bullish to corn. The Gulf CIF is responding
favorably. We were able to buy May futures on Wednesday's low and narrowly
doing the same on July corn. We may have the acreage planned for the right
supply of corn to meet 2007-08 demand but unless weather conditions perform
even near average, yield could be suspect.

Soybean Fundamentals: The unwinding of the Nov soybeans-Dec Corn futures
came off its recent peak of $4.516 to today's low of $4.21, key support
$4.15. Two groups out of Brazil have adjusted the crop size above USDA's 57
MMT. We are not buying into the big losses of corn acres because of
flooding within Argentina, but soybeans could be more likely because of
where the largest supply is located. One gray cloud, which does hang
overhead, is the potential for new crop soybeans from S America by US
Soybean crusher(s) because of the widening cash spread. Long corn planting
delays in the US suggest ultimately larger soybean acres.

End Stocks: Next Tuesday WASDE report is expected to trim 2006-07 end
stocks as a result of the need for the USDA to raise its crush est by 5
million bushels and export sales which are running 30% larger than last
year, 2% higher than the five year ave and shipments which are 23% larger
than last year.

Trade Posture: New orders had been written for soybeans, soybean meal and
soybean oil within our Grain Trading Strategies page, all with a bullish
bias. On Tuesday we entered long soybeans and soybean oil, Thursday we
entered the long soybean meal. Less acres suggesting a nice trimming of
2007-08 end stocks. Soybean oil for bio diesel was closely attached to
crude oil but picked up additional support from Malaysian Palm oil which
may have supply problems. We remain long term bullish soybeans as long as
corn does not run into planting delays and hands acres back to beans.

Wheat Fundamentals: Good news for wheat, Japan appeared for the first time
in two weeks to buy US wheat to the tune of 170 K tonnes. Better news
Thursday morning was how of the 170 k tonnes, 130 K tonnes was awarded to
the USA and the balance split between Canada and Australia, highly unusual
for the US to receive such a big piece of the pie. The immediate focus is
on the frost freeze expected to damage soft red winter wheat in the
Midwest. Offsetting this news is improved hard red winter wheat crop
conditions.

Planting Intentions: A combined 60.30 million acres produces 2.165 bil
bushels + carry in stocks of 472 mil and projected demand of 2.214 bil
bushels suggest end stocks of 528 million bushels and a season ave farm
price of $3.70 vs the previous marketing year of $4.15 per bushel but is
certainly better than $3.42 in 2005-06. This is based on 43.3 bu per acre.
Trim yield back to 37.2 bpa and the season ave farm price jumps to $4.15
per bushel. An outstanding yield of 52.4 bu/acre suggest the season ave
farm price slips back to $3.40 per bushel
Yes Wheat Acres Have Changed Noticeably: from the March to June acreage
reports. The most recent ten years has odds of wheat acres increasing an
ave of 153,000. Of the ten years, when acres have increased 50% of the time
it was by an ave of 1,063,000 acres. Of the ten years, when acres have
decreased 50% of the time it was by an ave of 758,000 acres. The single
largest increasing acreage year was 1.88 million in 1997 with the single
largest decrease of 1.228 million acres in 1998. Since 1999, each year
succeeds the previous year in the opposite direction. If this anomaly is
expected to continue after last years upward adjustment of 745,000 acres,
June 2007 acres could show a decrease in acres.

End Stocks: For next Tuesday's WASDE report, Allendale anticipates USDA needs
to reduce projected end stocks because of the recent hard charge in export
demand. The USA needs to ship 200 million bushels of wheat out of the USA
within the final nine weeks of the marketing year and is achievable. We
also suggest the USDA is likely to pull more wheat out of stocks used for
feed purposes which was economical before cash corn prices broke just less
than a week ago.

Trade Posture: Though fundamentals for new and old crop wheat are mostly
bearish, new tenders and the risk of frost and freeze are beginning to
exhibit a neutralizing effect. We are more inclined to trade new crop wheat
futures technically and are willing buyers of July futures at all three
exchanges. See trade recommendations within our Grain Trading Strategies
page.

Allendale Lean Hogs: There was some price movement today at the CME but by
the close only little movement from yesterday's levels. Cash hog prices
have been rising this week but April futures, due to expire in six more
trading days, is holding a $3 premium to the lean hog index. You have to
wonder if the April can do much more upside. For hog supplies we can
confirm hog numbers are slowing a) as they seasonally do and b) compared
with last year. In previous weeks the kill was 6% to 8% higher than last
year. Plugging in private analysts expectations, which include Allendale,
for Friday and Saturday and the week's kill will run 2% higher. A little
better hog supply in the coming weeks may help the May and June contracts.
Overall we are still supportive on summer month contracts.

Allendale Live Cattle: With last week's lighter cattle purchase and packer
concerns about profitability this week's kill will run 5% smaller than last
year. Wholesale beef prices have risen this week and there is some pretty
bullish talk for next week's beef trade as well. With that in mind cash
cattle traded at a whopping $100 this week from Kansas through Texas.
Expectations were only to see $1 or $2 higher from last week's $95 and $96
action. One news wire ran a quote suggesting $102 will be seen next week.
One thing of interest to note here is this $100 cash cattle price was $17
higher than last year in the same week. It is also interesting to note $100
is the new high for this up trend. It is the highest cash cattle price
December of 2003.

The record weekly cash cattle price was $108 in October
of 2003. There are expectations market ready cattle numbers will slow down.
We need to be clear here. On a strictly numbers basis cattle slaughter will
continue to increase into summer. That is why cash cattle prices should
fall going into summer. Now, with all the action going counter-seasonal
will prices actually fall? We have said in past weeks we feel this is an
investment money led rally and not a beef fundamentals based rally. If
April futures are not let to fall to cash as we near expiration cash cattle
prices have to rally to April futures. With that in mind we still contend
this market will not fall to levels of traditional true value' and will
remain inflated. However, it is hard to suggest summer futures need to be
priced in the high $90's as they currently are. We remain neutral to
bearish cattle futures.

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 is less than ideal conditions to begin a active planting campaign for 12 million more acres than last year.

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