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Fundamentally bullish to corn

Allendale research suggest when the Consumer Price Index reaches
above 4%, approximately 12 months later its impact may be felt within the
grains. Month of Jan 2007 the CPI registered 2.1%, reached a low of 2% in
August and then matched a high of 2.8% in Sept, made a new record of 3.5%
in the month of October. Food and Beverages account for 15% of the total
CPI make up, third to Housing at 43% and transportation at 17%. CPI Food
and Beverages Jan of 2007 at 2.42% 4.06% by July, 4.36% in Sept and reached
a record high of 4.37% by Oct. The question we asked, dating back to 1970
has there been any other years when a two month growth change has been
equal to or greater than the present 1.5% growth, and if so, what if any
impact did it have on corn and wheat futures. Allendale research found one
such year in 1987 and impacting the May futures as the 1.7%, two month
growth occurred by April. Specifically the May 1987 wheat futures increased
by 30 cents and May corn futures increased by a similar 30 cents. Allendale
suggest given the present growth of the CPI's food and beverage sector, it
may have a positive result for the May 2008 corn and wheat futures.

weekly soybean sales more than double primarily as a result of
China 70% share of the total weekly sales. China maintains a reduced 3% to
1% import tariff for soybeans and is aggressive before its holiday period
begins. 30 minutes after the weekly data was released, USDA did announce
China was an overnight buyer of 226,000 tonnes of soybeans which will be
recorded as part of the weekly export sales for the Nov 29th release. Corn,
soybeans and wheat weekly export sales were enough to reduce the amount
needed on a per week level in order to reach the 2007/08 export target for
each, another positive development.

Soybeans Protection: Allendale Inc President Paul Georgy came up with an
idea to protect your 2007 soybeans. He suggest in recent years the old crop
soybean market typically tops before the month of May as South American
soybeans will be available for use by that time. Please view a graphic of
reward to risk, where you would normally find our morning Weather Watch
page. Selling a May 1300 call and buying a May 1000 put provides down side
protection with a window for greater profits on cash beans. Current market
conditions would allow you to put this spread on for 10 cent plus a portion
of the margin requirement of underlining futures. The 10 cent option play
or $500 per 5000 bushels is at breakeven from 9900 to 12900. However if May
futures should happen to break below 9900 because of the S American bean
competition and larger US soybean plantings, and reach a level of 8900, the
option strategy per 5,000 bu contract could be worth $4,500 and at 7900 be
worth $10,000. If May futures reach 13100, risk is $1,000 per contract and
greater if futures move higher.

Fundamentals: Bullish to soybeans is China eagerly buying soybeans during
the Oct-Nov and Dec time period as its import tariff has been reduced from
3% to 1%. Oct 2007 soybean imports for China are 26% higher than Oct of
2006. After Dec, look for China to weigh more demand on South American
supplies and begin to wean away from the US. IF South America soybean
production maintains its positive early growth potential into the pod fill
stage, do not rule out the possibility of cancellations which wheat has
experienced. Most immediate broad based fundamentals are more bearish than
bullish for soybean futures. Total S America soybean production may reach
119.1 million tonnes (4.376 billion bushels vs 116 million a year earlier.
S America is hedging new crop production vs the May 2008 futures which
closed at a life of contract high of 11.07/bushel on Friday and viewed as
an incentive to continue to plant in southern Brazil, Uruguay, Paraguay,
Bolivia and Argentina. The seven day weather outlook for S America is
mainly neutral to slightly bullish to May futures as Argentina is
forecasted to experience net drying.

Cash Soybean Oil: our sources suggest the break even price to manufacture
biodiesel from soybean oil carries a cash price of 38.5 to 39 cents per
pound. The most recent cash price for soybean oil in the greater Midwest is
43.32 cents per pound. The higher trending cash market is likely to
suppress soybean demand for crush into soybean oil to process into
biodiesel and may become more public within the January annual WASDE
report. Soybean usage for 2007/08 to be crushed for biodiesel is estimated
at 352 mil bu before the higher trending soybean oil cash market. 2006/07
soybean use for biodiesel was 252 million bushel.

Basis: over the most recent 18 years, for the 46th week (week of Nov 19th)
of the calendar year, the average Gulf basis has been 32 cents over Jan
futures. The max for basis has been 55 over with the minimum at 19 over.
The present basis level is 34 cents over. Basis on average has had a
tendency to work higher from mid Nov to the last week of Dec.

Exports: 2007/08 export use is 37% of annual production vs an average level
of 33%. Weekly exports sales of 47.6 mil bu compare to a five week ave of
28.4 mil bu and ten week ave of 24.6 mil bu. 2007/08 cumulative sales are
2% behind yr earlier levels and 6% behind the five year ave. Shipments are
21% behind year earlier levels.

Trade Position: We remain fundamentally bullish soybeans as a result of the
strength in crude oil. Soybeans could use some improvement in the exports
and yet the extreme drop in projected world end stocks to use for 2007/08
may keep a floor under futures. We entered long soybean oil based strictly
on an anticipated pull back in crude oil futures. Keep your eyes on crude
oil action as well as the US dollar. If they begin to reverse in direction
we anticipate the first of the grains and oilseed products to feel the
pressure is soybean oil and then soybeans. Also be aware of China's cash
soybean and soybean oil buying before the Dec 31 deadline when the import
tariff reduction expires and the potential for the South American soybean
crop production.

Wheat Fundamentals: since the most recent weekend, 1.116 million metric
tonnes of fresh tenders for international wheat has developed. India
launched a tender for 350,000 tonnes of wheat during the Nov 10-11 weekend,
on Thursday 11/15/07, another group from India set a tender for 350,000
tonnes, on Tuesday Morocco set a tender for 316,000 tonnes vs a previous
tender of 500,000 tonnes and Wednesday Jordan set a tender for 100,000
tonnes. Because the US can not meet the India quality standards, Allendale
does not anticipate India's needs to be met by US supplies. Allendale
suggest the news is ultimately positive as world wheat stocks to use are at
record 27 year lows. India's, Moroccan and Jordan tender could be viewed as
a notification warning, world wheat prices are at economic level rather
than waiting for the present down trend to continue. Also of key
fundamental importance is an overnight frost freeze in Argentina in
southern Buenos Aires just as wheat was in the heading phase likely
trimming crop production. Argentina completes its wheat harvest in January
and more recently its farmers are at the mercy of its governments knee jerk
export quotas to check domestic inflation. We do not rule out the same
occurring in the 2007/08 marketing year. Both the European Union and China
winter crop weather is regarded as positive, potentially capping July 2008
wheat futures.

NASS: Good to excellent wheat conditions fell from last weeks 53% to 49%
for the week ended Nov 11. Look for the new crop wheat trade to begin to
take notice. Kansas wheat conditions fell to 49% vs previous 55%, OK fell
to 40% vs the previous weeks 44%, and Texas fell to 22% vs 23%. Wheat
emergence continues to struggle for OK at 16% behind its five year ave,
Texas 13% behind and now add NC at 16% behind its five year ave. The 6 to
10 day National Weather Service until Thursday had a string of forecast of
below ave precip for the southern Plains but has now switched to above
normal precip and below ave temps suggesting snow cover may be on the way
and may be perceived as bearish to new crop futures.

Basis: over the most recent 18 years, for the 46th week (week of Nov 19th)
of the calendar year, the average Gulf basis has been 38 cents over Dec
futures. The max for wheat basis has been 83 over with the minimum at 9
over. The present basis level is 60 cents over. Wheat basis on average has
had a tendency to work sideways from mid Nov to the last week of Dec. Basis
traders be aware of the time line.

Exports: 2007/08 export use is 56% of annual production vs an average level
of 46%. Weekly exports sales of 15.3 mil bu compare to a five week ave of
15.8 mil bu and ten week ave of 35.9 mil bu. 2007/08 cumulative sales are
98% above yr earlier levels and 85% above the five year ave. Shipments are
82% above year earlier levels, helping to set a floor for old crop futures.

2007 Cash Marketing: Allendale sold 50% of its 2007 wheat inventory on
9/18/07 based on historicals. The second opportunity is next April-May. See
our Hedge Advice page for instructions. The Dec/Mar CBOT wheat spread is 21
cents premium the March. Your cost to store wheat per month is 5.8 cents
per bu. The present futures spread is paying more than break even and
warrants the need to roll Dec Hedges to March 2008 futures. On Monday
10/22/07 we rolled the remaining 50% of our 2007 wheat hedged in the Dec
2007 futures to the March 2008 futures.

New Crop 2008 Marketing: the July 2008 life of contract high is 6970
achieved Monday Oct 22. The recent low is 6470 on Oct 25th. Allendale is
35% hedged of anticipated new crop wheat production at a level of 6150.
Allendale has resting orders to hedge an additional 10% at a level of 7220.
Complete details may be found within our Hedge Advice page. New crop July
2008 wheat futures have been in a sideways trade range since 9/27/07.
Allendale's advice is if you have not hedged any new crop wheat, establish
a minimum of 20% of production potential on the upper end of the range
(6900-6950).

Trade Position: the fundamental facts are world supplies are challenged by
aggressive demand. However the technical picture remains weak. We have
written new orders to sell KCBT and MGEX Dec Wheat, and entered a short Dec
CBOT wheat on Thursday of this week, purely from a technical stand point.

Corn Fundamentals: bearish to corn futures, declining potential for feed
use, news Brazil 2007 corn exports may reach 11 million tonnes vs last
years 4 million tonnes and would assume the #3 corn exporter in the world
behind the US and Argentina and replacing China. Argentina is also in the
midst of planting its 2007/08 corn crop which is estimated in a range of 25
to 30 million tonnes which USDA is presently estimating at 22.5 million
tonnes and estimates 16 million tonnes of exports or 71% of the crop. If 27
MMT of corn is grown, exports could vault to 19.17 million tonnes and
compete vigorously against spring time Gulf basis in the US. Bullish to
corn is strong export demand, energy and soybean futures rally and large
quality crop. Positive news beginning to appear on Wallstreet in the form
of expectations for corn demand for ethanol processing near the end of the
first quarter of 2008.

Basis: over the most recent 18 years, for the 46th week (week of Nov 19th)
of the calendar year, the average Gulf basis has been 32 cents over Dec
futures. The max for basis has been 62 over with the minimum at 16 over.
The present basis level is 58 cents over. Basis on average has had a
tendency to work sideways to slightly lower from mid Nov to the last week
of Dec. Continue to monitor the temps for the major Midwest, the longer it
stays warmer than average, basis for barged corn and soybeans are expected
to stay firm. Once the upper then mid Mississippi River close, basis
strength could shift to the IL, OH, MO and lower Mississippi Rivers and
away from the upper Mississippi River. When the upper Miss closes, look for
interior basis in IA, IL, WI and MN soften as competition from the export
sector is closed for the winter.

Exports: Exports: 2007/08 export use is 17% of annual production vs an
average level of 20%. Weekly exports sales of 53.7 mil bu compare to a five
week ave of 54.3 mil bu and ten week ave of 59.4 mil bu. 2007/08 cumulative
sales are 33% above yr earlier levels and 57% above the five year ave.
Shipments are 4% above year earlier levels but 54% below the most recent
five year average.

Marketing: Cost of carry from Dec hedges to March is 3.6 cents per bushel
per month, or the need for a carry of 10.8 cents. The futures market is
offering 17 cents. Allendale did roll its Dec corn hedges, covered with
bull call spreads to the March futures on 9/27/07. If you have not rolled
Dec corn hedges, get them rolled. See complete marketing advice within our
Hedge Advice page. If your 2007 harvest is not hedged in the futures then
look to your local cash markets to discover if the buyer is offering carry
of at least 3.6 cents per bu, per month. Contact your Allendale
representative for re ownership ideas.

Cash Peaks: Dating back to 2000, national corn prices have peaked more
frequently in the months of Dec, April and May.

2008 Corn Production: Allendale has 10% of anticipated 2008 corn production
hedged at a level of 4220. The Dec 2008 corn futures life of contract high
is 4364 as of Wed Nov 7th, 2007, with a recent Oct low of 3864. Allendale
had resting orders to hedge an additional 10% at a futures price level of
4360 which was filled and brings us up to a level of 20% hedged at an ave
price of 4290. We will be methodical in hedging for the balance of the 2007
calendar year and extremely cautious entering 2008 spring plantings if in
fact corn acres are replaced with bean and wheat acres.

Trade Position: fundamentally we remain bullish to corn even with record
production as demand remains strong globally and record low levels of world
end stocks to use. We have written new orders to re enter long Dec and
March futures.

Observation: cumulative export inspections are 71% above year earlier
levels for wheat (increasing), 6% for corn (increasing), and soybeans 25%
behind year earlier levels vs 20% behind just a week earlier (decreasing).
Export demand remains good for corn but soybean sales and inspections
continue to slide. Soybean exports account for 37.5% of annual production
and corn exports account for 17.8% of its 2007/08 marketing year
production. US Soybean sales need to get moving, but may be limited by
potential record S American soybean production, scheduled for harvest in 4
to 5 months vs US soybean futures which are running 62% above yr ago
levels.

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 research suggest when the Consumer Price Index reaches above 4%, approximately 12 months later its impact may be felt within the grains. Month of Jan 2007 the CPI registered 2.1%, reached a low of 2% in August and then matched a high of 2.8% in Sept, made a new record of 3.5% in the month of October. Food and Beverages account for 15% of the total CPI make up, third to Housing at 43% and transportation at 17%. CPI Food and Beverages Jan of 2007 at 2.42% 4.06% by July, 4.36% in Sept and reached a record high of 4.37% by Oct. The question we asked, dating back to 1970 has there been any other years when a two month growth change has been equal to or greater than the present 1.5% growth, and if so, what if any impact did it have on corn and wheat futures. Allendale research found one such year in 1987 and impacting the May futures as the 1.7%, two month growth occurred by April. Specifically the May 1987 wheat futures increased by 30 cents and May corn futures increased by a similar 30 cents. Allendale suggest given the present growth of the CPI's food and beverage sector, it may have a positive result for the May 2008 corn and wheat futures.

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