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Corn stocks to drop to '86 lows

Allendale: has released its estimates for 2008/09 corn, soybean and wheat
production as well as 2007/08 and 2008/09 new crops stocks both
domestically and globally. The highlight of the estimates is how old crop
stocks of corn are expected to fall from 1.332 billion bushels to a level
of 481 million bushels for the 2008/09 marketing year. 481 million bushel
end stocks are at lows not experienced since 1995/96.

Historical Price Trends: best odds for the week of May 05, according to our
HPT page is for CME June Hogs and CBOT July Soybean Meal. Over the most
recent ten years, odds of 80% for higher CME June Hog futures than where
they closed on Friday of the present week. Over the most recent ten years,
odds of 70% for higher futures for July Soybean Meal than where they closed
on Friday of the present week. Please see the HPT page for the complete
list.

For The Week: for the week, May corn futures value increased 4%, May
soybean futures value decreased 3% and July CBOT SRWW value decreased by
1%.

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. A detailed technical look at the grains
and livestock are available within our Allendale Advanced Charts.

Conclusion: July corn, as well as CBOT, MGEX and KCBT, are likely to use
its # MA as immediate support. A breech of #2 MA for July corn may induce
increased levels of selling pressure.

Corn Planting: pre release trade estimates for Mondays planting progress is
27-30% vs 10% last Monday, 53% last year and a five year average of 59%.
NASS actual results suggest 10% of the corn crop has been planted as of
Sunday, April 27th. The most recent year when only 10% of the corn crop was
planted for that week of the calendar year was 1995. The six to ten day and
two week NWS forecast normal precip for the greater Midwest and yet cooler
than ave temps for the extreme north central Midwest.

Corn Fundamentals: all eyes are on the late pace of planting and weather
forecast. The trade is also aware of a strengthening US dollar which may
press exports but also realize, few acres of corn planted in 2008 vs 2007,
suggest there is good support for futures. Since 2004, USDA has raised corn
acres planted in the June Planted acreage report vs the March Prospective
acreage report an ave of 1.481 million acres with a range of 179,000 to a
maximum of 2.434 million.

Exports: corn exports account for 19% of the total 2007/08 use. with 18
weeks remaining in the marketing year, cumulative sales of 2.212 billion
bushels to all nations are 22% higher than year earlier levels and 31%
higher than the five year average. Based on the past 4 weeks ave weekly
sales the US is on pace to sell 2.482 bil bu vs USDA target of 2.5 bil bu.
Shipments of 1.659 billion bushels are 16% higher than year earlier levels
and 61% below the five year average.

New Crop Sales-Corn: The old crop marketing year officially ends on August
31. We have sold 91 million bushels of new crop corn to date vs 64 mil bu a
year earlier and 30 million bu for a three year ave.

Corn Special: Next Friday 05/09/08, USDA will unveil its first 2008/09
supply and demand projections in the May WASDE. The question we ask, could
USDA adjust acres planted/harvested and or yield for corn given the less
than stellar planting pace? Allendale's research compared the May estimates
vs USDA March Prospective Planting estimates with regards to acreage adjust
and concludes, do not anticipate a notable acreage adjustment. However what
USDA has done is adjust yield based on planting performance for the May
WASDE vs its Outlook Forum estimates (typically held in late Feb/Early
March.

Dating back to 1998, there have been 6 of 10 years when USDA has made
a 1 bu/acre or larger adjustment to yield from the Forum to the May WASDE.
The minimum adjustment higher has been 1.1 bu per acre in 2001 and maximum
adjustment higher of 2.8 bu per acre in 2004. Since 1998 there has been one
time when USDA lowered the corn yield from Forum to May WASDE and its was a
very notable 2.5 bu/acre reduction, in 2007. Of the six years only one was
reduced, but of equal interest is of the most recent four May WASDE
reports, each year, USDA has made reference to adjusting yield based on the
pace of planting. Allendale suggest, USDA is likely to continue its
adjusting ways next Friday. In the 2008 Feb Outlook Forum USDA estimated
yield at 154.9 bu per acre. Most likely yield could be adjusted lower by
more than last years 2.5 bpa in 2007 when the planting pace was running 13%
behind as of May 4th. Allendale estimates the May 4th, 2008 planting pace
to be a minimum of 25% behind the five year ave. The question, would USDA
be as so bold to reduce yield per acre by an epic 5 bu? Allendale would be
shocked if USDA were to make such a bold move.

Allendale's research suggest
the trade could have a bullish reaction to a reduce yield in May 9th's
WASDE report but foresees USDA not only adjusting overall 2008/09 corn
production lower, but most likely adjusting demand (feed, ethanol and
export) lower allowing for a notable reduction in projected end stocks vs
2007/08 levels.

USDA 2008 Outlook Forum projected end stocks were estimated
at a level of 1.243 billion bu and $4.60/bu season average farm price vs
Allendale's estimate of 482 mil bu and $6 SAFP based on average weather.
Based on the poor rate of plantings in 2008, Allendale estimates end stocks
could find reason to be as small as 211 mil bu vs 426 mil bu in 1995.
Ironically 1995 also had a unique slow planting pace, but ultimately its
crop was decimated by a mid summer drought.

Conclusion: Allendale's research suggest look for USDA to lower its yield
estimate, not planted acreage in the May 9th WASDE. Even though Allendale's
supply demand projections are able to support a 62% or greater reduction in
2008/09 end stocks vs 2007/08, we doubt USDA to be as sympathetic. How much
of a yield reduction and just how tight do YOU think USDA will project on
May 9th? Allendale's continue to remain bullish 2008 old and new crop corn
futures and cash markets.

To Add: there is a growing trader consensus USDA may likely back out of a
sub 750 million bushel end stock estimate for its first official 2008/09
supply demand report.

Trade Posture: Long term Allendale remains bullish to old and new crop
corn. Our research suggest with present planting delays, 211 million
bushels vs present old crop corn stocks of 1.332 billion bushels, may not
be far away for 2008/09 marketing year corn. We are willing buyers of July
call options. We respect the upward technical bias of the daily Dec 2008
corn futures chart and positive fundamentals for corn.

Observation: three consecutive weeks, wheat export sales have been less
than what is needed to meet USDA's final export target. From here to the
end of the marketing year, the five year average for wheat export sales has
been a high of 10 million per week to the final few weeks to reveal net
cancellations. May and June usually finds weekly export sales on soybeans
in a range of 5-10 mil bu. Weekly corn sales for the months of May and June
have been in a range of 50 to 25 mil bu.

Soybean Fundamentals: the immediate focus is on the Argentine farmer vs
government negotiations. On Friday farm groups returned to a soft strike
(no road blocks) and have scheduled a meeting with the government on
Tuesday May 6th. The lengthier the delay in negotiating the sliding tax
scale on soybean exports, the better demand for US and Brazil soybeans.
However when and if the strike is settled Argentina is expected to resume
its soybean exports and premium taken out of US old crop soybean futures.
New crop soybeans continue to monitor the corn planting progress and if
delays expand for corn, soybeans acres are perceived as expanding from the
March to June acreage reports. Since 2004 acres have declined from the
March to June acreage reports and even when there was an economic advantage
to plant soybeans vs corn between the two reports. The average reduction in
acreage from the March to June period has been 1.558 million acres. The
minimum adjustment lower was 602,000 acres and maximum reduction of 3.059
million acres.

Exports: soybean exports account for 34% of the total 2007/08 use. with 18
weeks remaining in the marketing year, cumulative sales of 1.060 billion
bushels to all nations are 3% better than year earlier levels and 18%
higher than the five year average. Based on the past 4 weeks ave weekly
sales the US is on pace to sell 1.3 bil bu vs USDA target of 1.05 bil bu.
This level is influenced by the Argentina strike/negotiations. Without the
issue, the target could be lower at a level of 1.159 billion bushels.
Shipments of 905 million bushels are 3% lower than year earlier levels and
17% above the five year average.

Meal and Oil: with 42% of the marketing year remaining, Cumulative export
sales of soybean meal have met 74% of its marketing year target, 11% below
yr ago levels (and losing ground) and 8% below its five year average.
Cumulative export sales of soybean oil have reached 76% of its target vs
63% year on year and are 1% less than its five year average.

New Crop Sales-Soybeans: The old crop marketing year officially ends on
August 31. We have sold 47 million bushels of new crop soybean to date, vs
35 mil bu a year earlier and a three year average amount of 46 mil bu.

Fats/Oils Used for Biodiesel: the biodiesel production market continues its
struggles for the 2007/08 marketing year as it continues to trend lower.
However the positive news for month of March soyoil used was 234 million
pounds vs 217 million for the month of Feb, 268 million in Jan and the
market year high of 281 million pounds for the month of September.

Trade Posture: the trade remains focused on Argentina strike developments
and Midwest weather forecast. Stocks of USA soybeans remain tight and are
expected to tighten further (30 million bushels) in the May WASDE based on
better than average exports. With much of the focus on corn planting
progress, Allendale recommends to sell rallies for the short term after
taking profits on Monday from its previous short position on soybeans and
short soybean meal position on Tuesday.

Wheat Fundamentals: No deal for French wheat to Egypt. Egypt held talks to
buy 14% of its annual needs from France, but came away with only discussing
the fact it has enough reserves to last in August. With futures maintaining
a downward bias, Egypt may believe softer prices lie ahead. Iraq wheat
production is estimated to be down 36% in 2008/09 as a result of drought.
Iraq imported 3.5 million tonnes of wheat in 2007/08 and will likely match
the level in 2008/09 but with a bigger market share going to Australia.

Exports: wheat exports account for 62% of the total 2007/08 use of
production. It must be noted, typically exports account for 49% of annual
total use. With 4 weeks remaining in the marketing year, cumulative wheat
sales of 1.243 billion bushels to all nations are 42% higher than year
earlier levels and 28% higher than the five year average. Based on the past
4 weeks ave weekly sales the US is on pace to sell 1.293 bil bu vs USDA
target of 1.275 bil bu. Shipments of 1.099 billion bushels are 49% higher
than year earlier levels and 89% 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 133 million bushels
of new crop wheat to date vs 31 mil bu a year earlier and a three year
average of 5 mil bu.

January 19th 2008: Those attended our 18th annual conference are well aware
of the wheat presentation which clearly explained the 2008 wheat crop was
the third weakest in condition to enter dormancy dating back to 1989. 2000
and 2002 tied for second place with the weakest in 1989. Only 2000's
harvest had better good to excellent ratings during its harvest. 1989 and
the 2002 crop had weaker good to excellent ratings at harvest vs where they
entered dormancy. Odds suggest the 2008 winter wheat crop may enter harvest
with weaker conditions than where it entered dormancy. Add to this The
winter wheat crop condition report was released Monday for the fourth time
in 2008. The 18 states which made up the majority of 2007 production came
in at 46% good to excellent vs 45% the previous week. One year ago,
conditions were 56% good to excellent with a five year average closer to
52%. The five year ave suggest for the next five weekly reporting,
condition report decline nearly a total of 5%, suggesting a target in five
weeks of 40% good to excellent, 10% below year earlier levels of 55% good
to excellent. The 2008 crop entered dormancy at a level of 44% good to
excellent. Is this wheat crop destined to fatten the odds and make it three
out of four years when the crop enters dormancy in historically weak
status, its condition at harvest is weaker?

Trade Posture: even though present US winter wheat crop conditions are less
than average, globally the crop is doing well and headed towards larger
production than year ago levels. World wheat stocks are expected to rise to
128 million tons in 2008-09, up 14 million tons from 2007-08. At this
juncture Allendale is willing to sell corrective rallies via call options
and or futures. New orders are found within our Grain Trading Strategies
page.

Lean Hogs: Though today's CME action posted a slight rebound the net result
for the week is the situation changed. June lean hog futures closed down
$4.40 for the week. Also important this week stopped the almost month long
string of daily gains in the cash hog trade. We have made and completed the
seasonal move higher in cash hogs. Now we have the minor fluctuation in
supply and demand through summer to give us the remaining moves higher or
lower.

Hog Pricing: Bulls have given up control. This week's break on the futures
has brought them closer to value. Sure, summer futures could fall another
$2 to $3 or so but we feel the real downside problem is October and
December. Our downside target is $65 on the December. We accept the fact
those far deferreds may not lose most of their premium until after summer.
This week we also wrapped up the last 25% of marketings for 2008. We are
now completely covered on marketings. For 2009 we only have 25% covered on
the February contract and have no incentive to add any further. Waiting to
see how aggressive the liquidation, currently going on, will be a better
approach. For speculative traders this week we also worked on the idea of
selling July $80 calls for +$1.50. That appears to be a solid position.

Live Cattle: Live based action occurred from Kansas through Texas at $92
which was steady yesterday. Nebraska moved dressed based numbers today at
$149. That was steady to $1 lower than last week. For recent news this
morning we also noted South Korea reaffirmed their commitment to restart
purchases of US beef by mid-month. We have laid out a story in the past
month that bulls could run the show in April based on warm weather demand
but once the trade got a whiff of upcoming supplies that bears would retake
control. That appears to be happening right now.

Cattle Pricing: June futures are implying cash cattle will be $93 at the
end of June. We feel $89 cash, which with a normal basis for that time
equals $88 June futures, is a more realistic target. We will say our
downside objective is still pretty darn optimistic and includes big hopes
for South Korean exports. For cattle feeders we have marketings through
summer 100% covered using the June and August futures. For speculative
trading we had suggested the December/June live cattle spread. It posted a
bottom on Friday at $10.55 premium to the December. Today it closed at
$11.97. Our target is $15.

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

Allendale: has released its estimates for 2008/09 corn, soybean and wheat production as well as 2007/08 and 2008/09 new crops stocks both domestically and globally. The highlight of the estimates is how old crop stocks of corn are expected to fall from 1.332 billion bushels to a level of 481 million bushels for the 2008/09 marketing year. 481 million bushel end stocks are at lows not experienced since 1995/96.

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