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Soybean pricing opportunities

Allendale has released its corn production
estimate for next Thursday monthly crop production and World Ag Supply
Demand Estimate reports.

Only two estimates have been officially released
publicly to the industry, Allendale's 12.795 bil bu and another firm at
13.375 bil bu. Allendale is using its yield est of 149.8 bu per acre vs
USDA's most recent yield est of 150.3 bu per acre and the other firm at
156.6 bu per acre. Based on the ten year ave is for USDA to adjust its
yield per acre from the June to July by an increase of .4 bu per acre.

Of
the ten years, USDA has increased yield two times for an ave of 3.5 bu per
acre with the high end of 4 bpa in 1999 when crop conditions were 77% good
to excellent and the low end of 3 bu per acre when crop conditions were 75%
good to excellent in 2003. Only twice in the most recent ten years has USDA
reduced its bpa estimate and it was by 3 in 2005 when the crop condition
was 62% good to excellent and in 1996 when the crop condition was 61% good
to excellent. This suggest if crop conditions the Monday before the release
of the crop production report are 62% or less there may be a reason for
USDA to reduce yield. Conversely if conditions are 75% or more for the good
to excellent category, there may be reason to increase yield per acre. If
conditions fall into a range of 63% to 74% there may not be a need to
adjust yield. This is the driving reason why we suggest USDA is likely to
leave yield per acre unchanged from the June to July report, why Allendale
will leave its yield unchanged and why we do not find it necessary to
increase yield by 6.3 bu per acre above USDA's June estimate.

Corn Fundamentals: The focus remains on weather as the Midwest corn crop
enters the key pollination phase. For the major Midwest, a brief
warm-up this weekend then rains and more seasonal type temps for next week.
It is the following weekend when longer range forecast suggest a
substantial increase in day time temps which could jeopardize the crop. The
most recent correction in corn prices is expected to spark end user demand
on a scale down basis as long as weather remains beneficial. This was very
evident in the weekly export sales report released on Friday. Old crop corn
sales exceeded the pre release trade estimates. More impressive is how
cumulative new crop corn sales at 182 mil bu are 329% higher than year
earlier levels of 42.4 mil bu.

New Crop Marketing: Based on our most recent price projections, Dec corn
futures are in a downward correction and estimated to find a bottom near
the 3200-3300 level. Before Dec corn expiration futures are expected to
work back towards 3800 with basis improving. End users and producers, use
the preceding information to plan.

Old Crop Marketing: Recent high prices strained usage and as sales were
made during the final stretch of plantings, they placed a strain on basis
as well as futures. Now that futures and basis have weakened, we see this
as an anticipated catalyst to spark increasing demand. Provided the present
old crop-new crop spread to hold between 8-12 cents, look for a move to
3650-3700 vs the Sept futures to complete old crop marketings. Midwest cash
average price is $3.05 per bushel. Cost of carry on farm is estimated at
3.4 cents per bushel per month. Unless your cash market is willing to pay
you to store the crop, signals suggest it is time to move your old crop
inventory. Allendale sold its cash corn crop on May, 31, 2007.

Technicals: Old and New crop corn and soybeans and new crop wheat. 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.

Observation: Speaking strictly from a technical standpoint, impressive how
corn futures were able to close higher in spite of USDA adding 2.434
million acres of corn last Friday. Only MGEX wheat futures could not muster
a higher weekly close suggesting the impending harvest could continue to
weigh on MGEX, then CBOT and finally KCBT wheat futures. Use the key # 1 MA
to anticipate stopping into a corrective short position. Allendale suggest
the technicals are leading the way and then using the fundamentals as the
catalyst, either big or small as to how much of a correction may be
required.

Observation: Soybean sales for 2006-07 have exceeded USDA's target by 22
million bu with ten weeks remaining in the marketing year. Based on
Allendale's research, given the present pace of soybeans sales and
shipments, USDA may be spot on with its 1.080 billion bu and we see no
reason for USDA to make an adjustment in its sales or shipment forecast.
Using the recent four week shipment pace, USDA would need to reduce corn
exports by 50 million bu. However if the shipment pace were to maintain as
it has since the first week of the marketing year, USDA may need to
increase exports by 50 mil bu.

Mexico Makes The Difference: For the week ending 6/21/07 four of the top
five importers of US corn have reduced purchases this marketing year, vs
year ago levels. Only Mexico has purchased more and by a substantial
amount. Mexico has purchased 46% more US corn in 2006-07 vs 2005-06. Japan
has registered 8% less, Korea 27% less, Taiwan 10% less and Egypt 10% less.
Combine the total purchases of the top five importers and total sales are
1% higher than yr earlier levels. Thank you Mexico.
The Final Results, From the Day of the reports to One Week after. what
happens to Dec corn futures prices from the close of business the day of
the USDA June Planted Acreage and Quarterly Grain Stocks report to the
close of business one week later; for Dec corn the ten year ave has been
for a 3.1 cent lower close. 60% of the time futures have closed an ave of
11.8 cents lower with a max of 20.5 cents and minimum of 1.5 cents. 40% of
the time when futures close higher it is by an ave of 9.9 cents with a max
of 16 cents and a minimum of 2 cents. As of July 6th, Dec corn futures
gained 1.25 cents.

Soybeans for Nov soybeans the ten year ave has been for a 7.7 cent
lower close. 50% of the time futures have closed an ave of 36.3 cents lower
with a max of 63.25 cents and minimum of 21.25 cents. 50% of the time when
futures close higher it is by an ave of 20.9 cents with a max of 37 cents
and a minimum of 8 cents. As of July 6th, Nov soybean futures gained 14.25
cents.
Wheat for Dec wheat the ten year ave has been for a 2.3 cent lower
close. 50% of the time futures have closed an ave of 17.6 cents lower with
a max of 30.25 cents and minimum of 13 cents. 50% of the time when futures
close higher it is by an ave of 4.3 cents with a max of 7.8 cents and a
minimum of 3 cents. As of July 6th Dec wheat futures gained 12 cents.

Soybean Fundamentals: Interesting development taking place within
Argentina. For years, Argentina's bread and butter has been its exports for
corn, soybeans and wheat. Soybeans have undergone a recent metamorphosis in
the form of reduced exports of the whole soybean in favor of crushing the
bean domestically for soybean oil and meal to be used domestically and
exporting the processed products. The Argentina government is restricting
the use of energy and has impacted domestic crush facilities and hours of
use and number of shifts scaled back. This very well could present head to
head competition with US soybean exports and cause a more significant
erosion to basis levels within the US.

Observation: In the past seven years, Argentina meal exports have increased
109%, soybean oil increased 98% and soybeans 16%. Compare its growth to the
US with US meal exports at 3.9%, soybean oil at unchanged and soybean
exports at 8.4%.

2008 Soybeans: We strongly advise to hedge or at least foreword contract a
minimum of 15% of your anticipated 2008 soybean production while futures
hover above 9000 per bushel. Contact your Allendale Representative for
further instructions. Allendale officially hedged it first portion of 2008
anticipated production on Thursday and has written orders to add as
outlined in our Hedge Advice page.

Wheat Fundamentals: Wheat futures decided to correct to 50% off the recent
low of 5740. 50% retracement comes in at 6120 and what could be the
strongest resistance of 6200 vs the Sept futures. India has a huge obstacle
to overcome. Its State Trading Corporation, had earlier canceled a tender
for 1 MMT of wheat because of high prices. Just in the past 24 hours they
received seven bids at an even higher price range of 318-370 dollar a ton
vs May 30th bids ranging from 267-302 dollar a ton. How easy would it be
for India, to scrap zero tolerance on weed seed from the US to allow for
prices to soften. The international wheat suppliers are well aware of the
high bar India has sent against the US from competing. There is a mighty
difference between stubborn, foolishness and economic sense.

Marketings: As of 6/29, Allendale's new crop wheat futures were hedged in
the July and Dec contracts. Cash wheat values of $5.10 per bushel suggested
cost of carry of 4.6 cents per bushel per month. To carry wheat from July
to Sept futures suggest carry needs to be a minimum of 9.3 cents and the
market is offering 11 cents. Those with hedges in the July its time to roll
those hedges to Sept or Dec (spread is at 23 cents and your cost of carry
is 22 cents). Overwhelmingly it is the Oct-Nov time frame when cash wheat
prices peak. We recommended on Friday and on Monday rolled July hedges out
to the Dec and will now be prepared to sell into the cash market in the
October time frame. However do not ignore present form cash prices for
wheat to sell unhedged and July wheat hedged wheat into. If weather is able
to be more conducive for better corn production, by the time October rolls
around, corn could pressure the value of your wheat inventory. Call your
Allendale Representative for your specific cash marketing needs.

Allendale Lean Hogs: There were some questions this morning as to just how
large Saturday kill plans would be. Unusually there was a wide range of
estimates from one newswire from 50,000 to 80,000 head. Later in the day
the talk started that it would be near the high end of estimates. USDA
confirmed it by issuing a 82,000 head figure. For the week that puts the
kill up 1.8% over last year. That's actually not too bad. The three weeks
before this the kill ran from 4% to 6% higher than last year. The big news
for us this week was the suggestion from our pricing models that futures
may already have the needed downside priced in. We project Monday's CME
lean hog index to be $73.19.

Our long term price projections look for
August, October, and December contracts to end at $70.71, $65.50, and
$63.28. These prices are pretty close to current levels. Subscribers to the
Advisory Report through our website can see the hog price graph on the
Special Reports page. It graphically shows these futures are pricing in a
normal' decline for cash hogs from summer highs into fall lows. In the
past weeks we have urged speculators to hold bearish positions such as
selling calls. If some stability is seen in futures soon it could be time
to take profits. On the hedge side typically futures decline into August. A
bottom in early July would be unusual. That keeps us from recommending to
lift hedges at this time. There are good $5 to $7 profits in the July and
August hedges and $2 to $3 in the October and December hedges. We will hold
off from making that recommendation for now.

We also have to note another positive factor.
With the month of June out of the way the heaviest beef production month is
behind us. Now we simply look at demand for the rest of the summer. This
week we released research suggesting if we do have a cash cattle bottom in
it is pretty darn early in the season. We looked at weekly data since 1999.
In the eight years from 1999 through 2006 we had seven good years to work
with. In 2001 there was no solid summer bottom. Prices fell straight from
spring into fall during that time. In the seven remaining years the date of
the average low in cash cattle prices was July 20. 2006 had the earliest at
May 12 while 2004 had the latest at September 4.

Allendale Live Cattle: Reported sales in Nebraska were at $140 on a dressed
basis. That was up a large $7 higher than last week's $133 average. This
exciting news was the driver for today's CME rally. We have to clarify
something here though. Keep in mind last week Nebraska trade its cattle
early on Tuesday at $3 lower than the previous week. The live based trading
was at $86 and ending at $87 later in the week. Part of today's Nebraska
trade is simply making up for missing out of last week's action. Today's
$140 dressed price equals an $89 live price using a 63.6% dressing
percentage. At the time of this writing we are still waiting for live based
sales to start. We would look for $88 to mostly $89 to take it late this
afternoon. We will admit the size of today's rally was a bit surprising.
However, USDA's release of weekly slaughter statistics showed the kill will
end 2.7% lower than last year. The previous three weeks saw the kill run
from 1% higher to 1.5% lower.

We also have to note another positive factor.
With the month of June out of the way the heaviest beef production month is
behind us. Now we simply look at demand for the rest of the summer. This
week we released research suggesting if we do have a cash cattle bottom in
it is pretty darn early in the season. We looked at weekly data since 1999.
In the eight years from 1999 through 2006 we had seven good years to work
with. In 2001 there was no solid summer bottom. Prices fell straight from
spring into fall during that time. In the seven remaining years the date of
the average low in cash cattle prices was July 20. 2006 had the earliest at
May 12 while 2004 had the latest at September 4.

Other than 2006 the next
earliest low occurred the week ending July 9 in 1999. At this point, if
cash cattle prices appreciate in the next couple of weeks, we will have a
June 29 low. We have been looking for sideways cash cattle and futures
market to develop with a range from $87 to $89. Though we have noted some
positive points in this commentary it's hard to suggest this market is
ready for a brand new extended rally. It's likely we will have another week
of higher cattle trade next week then begin the sideways action. Also keep
in mind, so far, boxed beef is still trading mixed and not giving signs of
a bull market. With a potentially sideways trade it could be better suited
to selling a call and a put. It may be a little while before we recommend
to restart a hedging program.

Allendale has released its corn production estimate for next Thursday monthly crop production and World Ag Supply Demand Estimate reports.

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