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Futures strength buying corn acres from soybeans

Corn Fundamentals: Bullish fundamentals include strong demand both
domestically for feed use and for exports. Investment capital continues to
pour into corn for ethanol. Also, over fear of inflation, based on the weaker dollar, there is a growing interest with those wanting to own tangible
products such as the grains. Bearish signals are big domestic stocks of old crop corn. Bullish
factors for new crop Dec futures are USDA's projected end stocks for the
2006/07 marketing year.

Because of the futures' reaction to the USDA WASDE
report, talk is already circulating, given a average growing season, we may
have likely witnessed USDA's smallest 2006/07 end stocks in Friday's report. Plus, futures strength is said to be buying additional corn acres away from
soybeans.

For this week, we see a build up of soil moisture for the east
Corn Belt and net drying for the west Corn Belt. For next week, we see just the opposite scenario for both belts.

Export Sales: USDA increased its 2005/06 old crop corn export target to
2.025 from 1.95 bil bu. Per the latest sales data for week ending May 4th,
export sales are running 11% higher than yr ago levels. The present pace
suggest a final sales level of 2.080 bil bu. Our research suggest old crop
export sales drop off perceptibly in late June-early July. This is
important to know if you are planning on holding and then flat pricing old
crop 2005 grain. USDA set new crop export sales at 2.15 bil bu. USDA did
increase corn exports to China for old crop corn from 100,000 tonnes (4 mil
bu) to 290,000 tonnes (11 mil bu). However they estimate 2006/07 new crop
export sales to China back to 100,000 tonnes, in a word, disappointing.

Ethanol Production: USDA left 2005/06 marketing year corn consumption for
ethanol at 1.6 bil bu but catapulted new crop corn consumption to 2.15 bil
bu or 34.4% higher. Based on 78 mil acres planted from the March 31st
Planting Intentions report, Allendale suggest a level of 1.92 bil bu or
more of a traditional 20% yr to yr increase. Transporting the finished
ethanol product of ethanol to refineries for blending purposes remains a
very serious barrier for producers.

Quarterly Corn Stocks: March 1 Quarterly corn stocks on and off farm of
6.987 bil bu suggest June 1 quarterly corn stocks could come in at 4.692
bil bu which would be 37% higher than the three yr ave and 32% higher vs
the five yr ave for 3rd quarter stocks.

Season Ave Farm Price: For old crop corn, USDA left the season ave farm
price range unchanged from April's est of $1.95 to $2.05/bushel. For new
crop USDA has increased the season ave farm price to $2.25 to $2.65/bu.
Looks as though USDA is working on as little if any LDP for the fall of
2006.

End Stocks to Use: Old crop domestic end stocks to use are 20.2% vs last
years 19.8%. We would have to venture back to 1992 to find a larger value
which was 24.9% with a stocks level of 2.113 bil bu vs the present 2.226
bil bu. Global stocks to use are 17%. Since 1980 only 2003 were tighter at
14.3%. New crop end stocks to use are projected at 9.8% when using 78 mil
acres planted. If we plug in additional acres of 1.8 mil, taken primarily
away from soybeans, the end stocks to use increase to 11.9% or 1.384 bil
bu. Projected world end stocks to use for 2006/07 are 11.6%, which would be
a record, even tighter than 2003's 14.3%.

Dec Corn Futures: suggest a Dec futures high of 2800 near term and
correction to 2200 before the summer season could take futures back up to
2800 with a maximum high of 3000 under extreme conditions. Our fall low
suggest a price of 2300.

Dec Corn Five Year Ave: The most recent five yr historical ave suggest Dec
corn peaks now and grinds lower into late May. A retest of the April high
has been noted in early June , consolidates July through the middle of
September and then slides into the fall harvest.

Five Year Ave Cash Price: The five year ave cash price for corn for the
month of April $2.14, month of May $2.14 and month of July $2.03.

Bean-Corn Ratio: The CBOT floor trade perception for corn acres to steal
from soybean acres needs a bean-corn ratio of 2.19 to 1. At the close of
business for the planting intentions report the ratio was 2.25 to 1.
Friday's closing ratio is 2.24 to 1, down .13 vs last weeks close.

Corn Technicals: Two weeks ago, Friday's July futures close 2404, last Friday's futures close
2582. Our short term Moving Average indicators are 2420-2430 and 2450. Two weeks ago, Fridays Dec futures close 2640, last Friday's futures close 2816. Our short term
Moving Average indicators are 2670-2670 and 2680.

Trade Position: We are long old futures based on the funds interest in corn
based ethanol. Our objective for the long position has been and remains
2600. Friday's July futures high of 2600 did not allow us to reach the
objective until futures trade through 2600. Our long objective for Dec corn
futures was reached by mid-session Friday.

Soybean Fundamentals: It''s difficult to accept soybean futures closing
lower, that is until you glean through USDA's WASDE report and witness some
hefty end stocks estimates. Remember, USDA's WASDE report is based on the
Planting Intentions report released March 31st and is likely to be adjusted
lower when the June 30th Planted Acreage report is released. Brazil did
announce it will include soybeans in its government buying program and
should be enough to remove road and rail blockades. It looks as though
foreign investors which have a stake in exporting soybeans and it products,
convinced the Brazilian gov't to get serious about supporting the farmers
to ensure a steady flow of soybeans and to help the investors bottom line.

New Crop Sales: We added 20% more new crop hedges as outlined in our Hedge
Advice page. We do not recommend, as of yet, to cover with a call as we have
already done for new crop corn hedges.

Soybean Crush: Profit margins for crushing soybeans are at levels last
witnessed in the summer of 2004. Margins are approaching 80 cents when full
production mode is typically held in a range of 60 to 75 cents. Crushers
appear to be wading in profit and there are plenty of old crop supplies to
be had. See the quarterly stocks section below.

Export Sales: USDA increased left 2005/06 old crop soybeans export target
of 900 mil bu unchanged. Per the latest sales data for week ending May 4th,
export sales are running 21% lower than yr ago levels. The present pace
suggest a final sales level of 882 mil bu. Our research suggest old crop
export sales drop off perceptibly in late June-early July. This is
important to know if you are planning on holding and then flat pricing old
crop. USDA set new crop export sales at 1.09 bil bu.

Season Ave Farm Price: For old crop beans, USDA left the season ave farm
price unchanged from April's est of $5.65/bushel. For new crop, USDA has
decreased the season ave farm price to $5.60/bu and is using a range of
$5.10 to $6.10.

Quarterly Stocks: March 1 Quarterly stocks on and off farm of 1.669 bil bu
are a record and suggest June 1 quarterly stocks could come in at 1.077 bil
bushels. If realized, this would be 89% higher than the three yr ave and 73% higher vs the
five yr ave for 3rd quarter stocks.

End Stocks to Use: Based on the USDA's March 31st planting intentions
report, if farmers follow through with their intentions, projected end
stocks to use for 2006/07 is 21.7% vs the 2005/06 level of 20.3%. USDA
estimates new crop end stocks at 650 mil bu. This compares to old crop end
stks est of 565 mb. Since 1980, the highest stocks level close to USDA's 650
mil bu is its 2005/06 565 mil bu and then back to 1985's 536 mil bu.

Price Projections: Allendale price projections for Nov futures are
estimates to trade in a range of 5500 low to 6500 high throughout planting,
into the growing season and into the harvest.

Nov Soybeans Five Year Ave: The most recent five yr historical ave suggest
Nov futures consolidate in the months of April and May before walking
higher into June and July. After hitting its historical peak in early July,
futures have been known to sell off into October.

Five Year Ave Cash Price: The five year ave cash price for soybeans for the
month of April is $6.03, month of May $6.16, month of June $6.22, month of
July $6.25 and month of August $5.81. Price may not be as important as the
trend and timing.

Soybean Technicals: Two weeks ago, Friday's July futures close 6064, last Friday's futures
closed at 6130. Our short term Moving Average indicators are 6030-6000 and
5980. Two weeks ago, Friday's Nov futures closed at 6252, last Friday's futures closed at 6320. Our
short term Moving Average indicators are 6250-6250 and 6170, key support.

Trade Position: Because of the amount of calendar time
remaining to plant soybeans, a poor Friday close near its lows of the day,
and Brazil's gov't decision to support its farmers, we are willing to stop
ourselves into short positions at lower levels. The huge amount of longs
from the funds has created little elbow room and may need to rid the room
of some weak longs. There is a bit of a ground swell from several of the
capital investment firms suggesting a "parabolic" in commodities such as
the metals and energies, both corn for ethanol and soybeans for bio diesel
close attachment to the energy markets could experience weakness if those
outside influential futures markets experience a cleansing.

Wheat Fundamentals: If there is a grain market which is justifiable in its
level of futures existence based on supply fundamentals it is likely wheat.
USDA revealed very serious low levels of production as viewed near the
bottom of our Midsession Comments page. Be aware it is not uncommon for the
trade to transition away from production driven to demand driven.

End Stocks to Use: Domestic end stocks to use are est at 21.6% vs 2003's
tight levels of 23.2%. World end stocks are thin, primarily because of the
smaller production in the USA. At an estimated 17.7%, they are tighter than
2003's 18.9% and at no time dating back to 1980 have been as tight as they
are presently estimated. With the potential for record low end stocks to
use globally for wheat and corn simultaneously at least into the first half
of 2006, futures prices are anticipated to stay firm until world wheat
producers respond to the high futures levels, demand is restricted because
of the high prices and or the energy markets collapse.

Season Ave Farm Price: for old crop wheat USDA left the season ave farm
price relatively unchanged from April's est of $3.40/bushel. For new crop
USDA has the season ave farm price range est at $3.50 to $4.10/bu for an
ave of $3.80/bu.

Wheat Technicals: Key custom moving averages for July wheat futures are as follows: CBOT's SRWW ='s 3910-3780 & 3700, Last Friday's close 4014, KCBT's HRWW
='s 4720-4580 & 4510, tonights close 4812, and MGEX Spring Wheat ='s
4330-4320 & 4310, last Friday's close 4592.

Export Sales: If there is an immediate sign of suppressed demand because of
high prices, it might be the old crop export target. USDA did drop exports
from 1.015 bil bu to 1 bil. New crop exports are dialed in at 900 mil bu.
Of the potential production of 1.873 bil bu, exports are expected to
account for 48%. This is not a uncommon percentage for USDA to use. World
competitors could take USA market share if prices stay lofty too long
within the USA. Ask yourself, when is the last time the USA made a big
package sale since prices crossed over $4 for KCBT and $3.50 for CBOT?

July Wheat Futures: Seasonally, 5 yr ave July futures hit its peak in the
month of April, a aslide into the month of May, a correction of 50% into June and then a slide into new lows in the month of July.

Dec Wheat Futures: seasonally 5 yr ave Dec futures are near its lows in
late April, stage a small rally in the month of May, work into new lows by
July and then rally to its highs into Sept before falling sharply to its
lows in Oct.

Trade Position: Our short calls risk levels were triggered last Friday. The trend
for corn, beans and wheat, remains up and until futures experience at least
two back to back closes below our key custom moving averages, traders
attitudes are expected to remain bullish.

Lean Hogs: Steady to lower prices were seen in the CME pork pits on Friday. The
wholesale pork trade is slowly accepting the idea post Memorial Day demand
for pork may fall more than market ready hog numbers. Cash hogs traded
mostly steady today. Packers are trying to match up available hog numbers
with demand for pork. For right now, they are more concerned about
declining pork values than putting together a full kill for next week.
Therefore they are keeping kill plans a little tighter than perhaps they
could be. Overall, we still view the seasonal top ideas as valid. Our main
hedge objective is not to pick exact tops or bottoms but to market around
the seasonal peak at respectable price levels. We still feel the futures
trend will change from up to steady/lower soon and would work on
speculative trades accordingly. For hedging we are now 75% sold through
February.

Live Cattle: Active cash cattle trade developed at $78 and $78.50 in the
central and southern plains. That was steady with two weeks ago and as we
expected. One interesting thing to note about Friday's trade was the strong
comeback from early morning losses for the feeders. Higher corn prices off
the open did scare feeder cattle traders. Higher feed costs could
potentially cause cattle feeders to stop visiting the sale barn for a new
load. We hate to say it, but if losing $100 per head on finished cattle
right now is not going to deter you from buying new feeders, a dime rally
in corn certainly won't either. On the fat cattle end, we can note both June
and August, live cattle futures broke through the resistance levels. These big gains in open interest noted last week have shown
futures are gathering quite a bit of interest.

On the charts, fed cattle
futures are not looking too bad. We are neutral on summer month futures but
today's activity could shift that to neutral supportive. For hedges there
is no reason to add any to current 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
in this day and age.

Corn Fundamentals: Bullish fundamentals include strong demand both domestically for feed use and for exports. Investment capital continues to pour into corn for ethanol. Also, over fear of inflation, based on the weaker dollar, there is a growing interest with those wanting to own tangible products such as the grains. Bearish signals are big domestic stocks of old crop corn. Bullish factors for new crop Dec futures are USDA's projected end stocks for the 2006/07 marketing year.

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