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Still bullish corn futures

Soybeans, What Did We Learn?: the following is a brief accurate description
of what Allendale In presented at its 18th annual outlook conference on
Saturday Jan 19th "Today's Reality-Tomorrow's Opportunity". Allendale
projects 6 million more acres to be planted for the 2008 harvest vs 2007.
Allendale uses a projected yield per acre of 42.3 bu per acre to arrive at
2.906 billion bushels and by adding in 2007/08 carry in stocks, arrives at
total 2008/09 supply of 3.091 billion bushels. Nearly 98 mil bu less use
than 2007/08, estimates 2008/09 end stocks of 196 million bushels vs 177
million bushels for the present 2007/08 marketing year. End stocks to use
of 6.8% would compare to 2007/08's 5.9%. Allendale estimates the 2008/09
Season Average Farm Price at $10.25 vs 2007/08 $10.40.
Where you would normally view our morning "Weather Watch" page we
invite you to view the use of various feed stocks for biodiesel use have
reduced. Ironically the peak use was reached nearly the same time when
soybean oil futures began to rally. It is estimated biodiesel plants which
purchase its raw biodiesel feedstock are now running at 24% of capacity
utilization. The break-even on soybean oil to manufacture into biodiesel is
estimated at 38.5 to 39 cents per pound. The present cash price for soybean
oil is running 50 cents per pound.

Soybean Fundamentals: unlike corn or wheat, there is a fresh world supply
in the making and just down the road in South America. The Brazil Real vs
the US Dollar is held in a 1.72-1.85 trade range and nearly 20% less than
year earlier levels. Foreign demand is likely to monitor these two
developments and ultimately transition from US soybean supplies to South
America supplies. There is at present a small build on the bullish side for
soybeans as the perception within Argentina its crops are under stressed
because of dry weather. At present we are cautious to such perception.

US Census Bureau Crush: the small picture suggest Thursday US Census
Bureaus month of December soybean crush data is bearish to old crop
futures. We would agree IF you compare the actual results to the pre
release estimates. Allendale prefers to look at the big picture. The big
picture says at 162.4 million bushels of soybeans crushed for the month of
December are better than the previous months 155.7 million bushels and
better than year earlier level of 157.4 million bushels. USDA estimates a
2007/08 market year crush level of 1.83 bil bu vs last years 1.806 bil bu.
Based on the performance of the first four months of data, Allendale
suggest the crush pace may be more in line at a level of 1.845 billion
bushels.

Weekly Export Inspections: thus far in the marketing year, cumulative
2007/08 soybean inspections are 8% weaker than year earlier levels. This is
disappointing as we approach the South America soybean harvest.

Cash Peak: Dating back to 2000, odds favor a national cash soybean peak for
the months of August, December and April.

Old Crop Marketing: the March-May soybean spread is at 18 cents carry. The
cost per month to store soybeans at a cash level of $11.10 is 12.25 cents
for the Mar-May. Our old crop 70% remaining hedges are in the March
futures. If you are not hedged, make certain your local cash market is at
least offering carry to store. If you are bullish, sell the soybeans and
replace inventory with futures and or May call options. Ask your Allendale
Representative to run the Allendale Evaluator for your specific operation.

New Crop Marketing: We will hold at 40% of anticipated 2008 production and
alert when to resume hedges as we work into the South American pod fill
season.

Soybean Trade Posture: as we indicated on Tuesday, most vulnerable to
immediate recession talk may be the soybeans as the South America new crop
harvest is on the immediate horizon. Technicals have turned south and
fundamentals may be switching from bullish to neutral/bearish.

Wheat, What Did We Learn?: the following is a brief accurate description of
what Allendale In presented at its 18th annual outlook conference on
Saturday Jan 19th "Today's Reality-Tomorrow's Opportunity". Allendale
projects 3.6 million more acres to be planted for the 2008 harvest vs 2007.
Allendale uses a projected yield per acre of 41.5 bu per acre to arrive at
2.247 billion bushels and by adding in 2007/08 carry in stocks, arrives at
total 2008/09 supply of 2.592 billion bushels. Nearly 41 mil bu less use
than 2007/08, estimates 2008/09 end stocks of 312 million bushels vs 292
million bushels for the present 2007/08 marketing year. End stocks to use
of 14% would compare to 2007/08's 13%. Allendale estimates the 2008/09
Season Average Farm Price at $5.60 vs 2007/08 $6.65.

Projected days of wheat, were near 135 days as recent as 2000/01 and
2001/02. Presently the days supply of wheat is estimated at 39 days. With
increased production, slightly less use Allendale estimates the days supply
of wheat available after demand is met at 50 days which would represent the
second lowest dating back to 1999/00.

Wheat Fundamentals: The International Grains Council suggest world wheat
production to be a record 642 million tonnes. The IGC did not provide any
data on world use or projected end stocks. Allendale unveiled its specific
outlook on Saturday Jan 19th. Allendale estimates world production of 631
million tonnes, usage of 624 million tonnes and for end stocks to rise to
118 million tonnes vs 110 million for 2007/08. At 16.1% end stocks to use
for 2008/09, it would represent the second lowest level dating back to 1980
vs the present 15.4%. The world wheat situation is far from a comfortable
cushion of stocks.

Old Crop Marketing: your old crop wheat is hedged in the March futures. The
present spread between the Mar-May suggest to sell before March futures
expiration. Those not hedged in futures, there are major cash markets which
offer 14 cents to carry the crop until the April time frame. Monthly carry
cost for $8/bu cash wheat is 4.8 cents. From Jan to April, your cost to
store is 14.5 cents. It cost you more to store than what the market is
willing to pay. Be prepared to move the balance of the 2007 production. The
old crop value drops 68 cents per bushel from April to July delivery.

Cash Peak: Dating back to 2000, odds favor a national cash wheat peak for
the months of Dec and March.

MGEX SRWI: In analyzing the most recent soft red wheat index, if the
present March-May spread does not offer full carry, we advise to be poised
to pull the trigger on cash sales with two closes below 8160 SRWI or above
9000 SRWI. Tonights close is 8590.

New Crop: The futures trend has turned from sideways to up. Old resistance
is now new support 8400. We see no reason to hedge new crop above the 65%
level we have on for now. 8130 could be a bull to bear momentum price which
could prompt new additional hedges.

Wheat Trade Posture: Allendale remains bullish fundamentally to old crop
futures but is signaling an air of caution technically. Thin stocks and
continued increased export demand as well as fewer world suppliers is
fundamentally bullish. But with the new crop-old crop discount, look for
world demand to lighten up as we draw closer to the end of Feb, beginning
of March. MGEX March, May and July futures contracts close limit up.
Traders within the MGEX suggest the following are the pool sizes; March at
600, May at 500 contracts and July at 300.

Observation: weekly export sales were strong enough to reduce the amount needed on a per
week basis to reach USDA export targets for 2007/08. There are 17 weeks
remaining in the marketing year for wheat and sales of 62 million bu will
fill the target of 1.175 billion bushels for the marketing year. Although
sales of slightly more than 3.5 mil bu per week will fill the target, the
most recent 5 week sales ave per week has been 10.6 mil bu. Could it be
USDA's target of 1.175 bil bu could be filled in 6 weeks?

Containerized grain exports: to Asia reached a new record of more than
48,000 twenty-foot equivalent units in November 2007, 98 percent higher
than the previous year and 164 percent higher the 3-year average.

Barge: As of January 22, grain barge rates increased at most river
locations rates from St. Louis to New Orleans increased 46 percent from
previous week. During the week ending January 19, barge grain movements
totaled 498,000 tons, down 10 percent from the previous week and 21 percent
lower than the same period last year.

Ocean: In the week ending January 17, 50 ocean-going grain vessels were
loaded in the Gulf, down 2 percent from last year. Seventy-four vessels
were due within the next 10 days, 1 percent higher than the same period a
year ago.

Rail: U.S. railroads originated 27,324 carloads of grain during the week
ending January 12, the highest since November 3, up 21 percent from the
previous week, 11 percent from last year, and 11 percent above the 3-year
average.

Exports: wheat exports account for 50% of the total 2007/08 use. with 17
weeks remaining in the marketing year, cumulative wheat sales of 1.113
billion bushels to all nations are 71% higher than year earlier levels and
52% higher than the five year average. Shipments of 823 million bushels are
69% higher than year earlier levels and 77% above the five year average.

Exports: corn exports account for 19% of the total 2007/08 use. with 31
weeks remaining in the marketing year, cumulative sales of 1.750 billion
bushels to all nations are 31% higher than year earlier levels and 58%
higher than the five year average. Shipments of 977 million bushels are 14%
higher than year earlier levels and 61% below the five year average.

Exports: soybean exports account for 33% of the total 2007/08 use. with 31
weeks remaining in the marketing year, cumulative sales of 830 million
bushels to all nations are 2% higher than year earlier levels and 2% higher
than the five year average. Shipments of 468 million bushels are 4% lower
than year earlier levels and 17% above the five year average.

Corn What Did We Learn?: the following is a brief accurate description of
what Allendale In presented at its 18th annual outlook conference on
Saturday Jan 19th "Today's Reality-Tomorrow's Opportunity". Allendale
projects 3 million fewer corn acres to be planted in 2008 vs 2007.
Allendale uses a projected yield per acre of 155.3 bu per acre to arrive at
12.809 billion bushels and by adding in 2007/08 carry in stocks, arrives at
total 2008/09 supply of 14.243 billion bushels. Nearly 450 mil bu less corn
for feed use than 2007/08 but increased corn use for ethanol and exports,
estimates 2008/09 end stocks of 731 million bushels. End stocks to use of
5% would match the record low dating back to 1980 of 1995. Allendale
estimates the 2008/09 Season Average Farm Price at $4.45 vs USDA's present
$4 for 2007/08. Those wishing the specific details of the 2008/09 corn
outlook may order the disc or complete set by calling 800 551 4626 or may
complete an order form via the following web page.
http://www.allendale-inc.com/products/products.aspx

Fundamentals: China suggest it is prepared to export 200,000 to 500,000
tonnes of corn to neighboring Taiwan and help assist China in increasing
its domestic corn prices to prompt some serious acreage plantings in its
northeast main corn region. India announced it is very close to signing
deals on 500,000 tonnes of corn exports to Asia and will have another
500,000 to export in March of 2008, about the same time Brazil and
Argentina will begin its corn harvest. The weak US dollar continues to
support foreign interest in owning US corn.

2008 Price Projections: July and Dec corn price projections are found
within our website. If you are a subscriber but not on our internet site,
call 800 551 4626 and we can US Mail them to you.

Old Crop Marketing: cash and futures spreads suggest to continue to store.
The March - May futures spread is 12 cents. At $4.30 cash corn, you need
6.6 cents to store for the two months.

Cash Peak: Dating back to 2000, odds favor a national cash corn peak for
the months of April and May.

New Crop Marketing: The total amount hedged as a percent of anticipated
2008 production is 25%. 4936 vs the Dec 2008 is key support, breeched on
Wednesday but closed above on Thursday. The immediate technical trend is
bearish. Allendale Dec corn price projections suggest a correction to
4600-4700. We will monitor and alert when to resume hedges.

Corn Trade Posture: Allendale remains bullish to corn futures as world and
domestic stocks continue to decline despite higher trending futures
prices.

The 18th annual Allendale Conference professionally recorded. Place your
DVD order today. Receive the complete conference and 2008 research manual
and view at your leisure in the comfort of your home. Call 800 551 4626
http://www.allendale-inc.com/products/products.aspx

Lean Hogs: Though this week's kill was up 11% over last year the number
itself declined from the last two +2.4 million head weeks. Going from 2.4
million head down to 2.3 million is a good step. It is also the reason cash
hogs appreciated and why they will continue to. The cattle comments are a
bit large today so we will get to the meat of the matter on pork. Though
February and April are seeing upside now we still feel they are fairly
priced and do not see them needing to rally. Let the cash hog price come to
their price by expiration as they hold good premiums still. On the
speculative side we like selling April calls or puts as April futures may
not move a whole lot in the coming weeks.

The Beef Industry's Capacity Problem: In case you are not aware the US beef
processing industry has been in serious financial water since 2004. On
Christmas Eve of 2003 the US found its first case of BSE. Exports in 2004
were only 18% of 2003 levels. In 2007 we estimate they were only 55% of
2003 levels. No matter how you cut it US beef plants still do not have a
key profit center to rely on and that will not change much anytime soon. Up
until the BSE problem appeared exports masked a big problem in the
industry, overcapacity. Throughout the plains you will find huge slaughter
plants that do not run at full capacity. The chicken and pork processing
industries are in a much better situation. With the reduced exports the
capacity problem has been magnified. Tyson Foods has seen losses in its
beef segment in 9 of the last 15 quarters. The cumulative loss from January
1, 2004 through September 30, 2008 in their beef segment has been $117
million. Excel, Cargill's meat unit, is privately owned and does not report
profits. Swift, now owned by JBS Friboi, no longer has public debt out so
therefore does not report profits. Keep in mind Swift was the worst of the
industry and in our opinion probably still is. National Beef, partially
owned by its producer members, has not faired as poorly as they have the
cattle to draw from and work with more quality cattle than other companies.
Smithfield foods, the nation's fifth largest beef packer has posted losses
in 7 of the last 15 quarters totaling $7 million. We do a good share of
consulting with the investment money that goes into these companies. The
first thing we tell them, other than exports of course, is the industry has
a capacity problem.

Tyson's Reaction: In the past few months we have seen the industry make
some halfhearted attempts to limit slaughter. Perhaps a plant or two would
be quiet on a Monday or would not run a Saturday kill. This afternoon Tyson
noted they will end slaughtering operations at their Emporia Kansas kill
and processing plant. The company released a statement and we have
highlighted a few lines for you. "There continues to be far more beef
slaughter capacity than available cattle and we believe this problem will
continue to afflict the industry for the foreseeable future," said the CEO
and president. "We estimate the current slaughter overcapacity in the
industry to be between 10,000 and 14,000 head of cattle per day." The
statement also noted this. "This imbalance is especially a problem for
Emporia. Cattle production has moved from eastern to western Kansas over
the past twenty to thirty years, and the Emporia plant is no longer
centrally located in relationship to where most of the cattle it slaughters
are raised. In addition, the U.S. cattle herd is not growing. Tyson sees no
signs of appreciable growth in the fed cattle supply over the next two to
three years, which is consistent with the opinions of various industry
analysts. The rising price of grain, caused in part by the use of corn for
ethanol, has put pressure on feed costs, land costs and the use of farm
ground. Further, the number of cows being retained for calf production
continues to decline." Our client base may not like these actions, as it
means one less plant bidding for fed cattle, but this is what the industry
needed to do. Keep in mind even if expansion were to start this year and
2007 born heifers were held back for the cow herd, which they are not so
far, that would mean extra beef production wouldn't hit the market until
2010. If 2007 born heifers were held back from the feedlot and bred in
2008, they would give birth in 2009, wean in fall of 2009, then their
calves would not start coming out of feedlots until summer of 2010. Of
course lowered cow slaughter would mean more calves a little sooner than
that but the point is clear. The herd is mostly stable right now. For the
plant itself they will leave all slaughter equipment in place. It will be
used as a cold storage and distribution facility and will mainly process
ground beef. They will also take on a few specialty cuts which slow other
facilities down. The key point in this statement is the equipment for
slaughtering will be left in place. We would assume in four or five years
the wrappers on the equipment will be taken off and this plant comes out of
hibernation again.

Live Cattle Near Term: Today at 2pm USDA released the monthly Cattle on
Feed report. USDA found placements down .8% from last year during the month
of December. The average guess was for a 2.6% increase. We would assume
after three months of higher placements perhaps the inflow of winter wheat
grazers was slowing a little. Also consider the fact feedlots have been
losing money every month since June. Add to that corn prices rose almost
every day from December 1 to the end of the month. The lower number is
reasonable. Cattle placed in December come out from May through early
September. This report should give the June and August futures a 20 to 30
cent higher open on Monday. USDA suggesting Marketings out of feedlots in
December were up 1.2% over the previous year. The average guess was for a
.3% increase. Perhaps we cleaned up a few of the numbers which were not
moved in November. Either way this is mildly positive and should give
February futures a 10 to 20 cent higher trade on Monday. The net effect for
on total numbers in feedlots was they went from 1.1% larger on December 1
to 1.0% larger on January 1. There is something about this report which can
clue us in as to when the industry begins expansion.

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

Soybeans, What Did We Learn?: the following is a brief accurate description of what Allendale In presented at its 18th annual outlook conference on Saturday Jan 19th "Today's Reality-Tomorrow's Opportunity". Allendale projects 6 million more acres to be planted for the 2008 harvest vs 2007. Allendale uses a projected yield per acre of 42.3 bu per acre to arrive at 2.906 billion bushels and by adding in 2007/08 carry in stocks, arrives at total 2008/09 supply of 3.091 billion bushels. Nearly 98 mil bu less use than 2007/08, estimates 2008/09 end stocks of 196 million bushels vs 177 million bushels for the present 2007/08 marketing year. End stocks to use of 6.8% would compare to 2007/08's 5.9%. Allendale estimates the 2008/09 Season Average Farm Price at $10.25 vs 2007/08 $10.40. Where you would normally view our morning "Weather Watch" page we invite you to view the use of various feed stocks for biodiesel use have reduced. Ironically the peak use was reached nearly the same time when soybean oil futures began to rally. It is estimated biodiesel plants which purchase its raw biodiesel feedstock are now running at 24% of capacity utilization. The break-even on soybean oil to manufacture into biodiesel is estimated at 38.5 to 39 cents per pound. The present cash price for soybean oil is running 50 cents per pound.

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