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Wheat making a strong argument for more acres in 2007

Corn Fundamentals: Strong weekly export sales announced Friday for corn lent
strong fundamental support on top of the adjustment the USDA presented on
Thursday. USDA dropped corn production under 11 bil bu and end stocks under
1 bil bu as a result of smaller planted acres. USDA dropped demand by 25
million bu vs the Sept crop report while dropping production by 209 mil bu.
S Korea has sent the first warning shot across the bow of USA export demand
prices by purchasing 88% of it two day total purchase of 477 K tonnes from
China.

Weekly Export Sales: As of the most recent official USDA export sales data,
665 mil bushels of corn has been sold vs last years 426 mil bu and most
recent three year ave level of 450 mil bu.

Corn End Stocks: Domestic stocks are estimated at 996 mil bu vs 1.971 bil
last yr and 958 mil bu in 2003. World stocks of corn are 90 MMT vs 89 MMT
in 1983 and 125 MMT last year.

Corn End Stocks to Use: USA projects end stocks to use at 8.4% vs 17.5%
last year, 9.4% in 2003 and 5% in 1995. Globally end stocks to use are
estimated at 11.1% vs 16.1% in 2005 vs 14.3% in 2003. World end stocks to
use have not been this tight dating back to 1980.

Cash Corn: It is the March-April time period when the National corn price
average more often than not finds its calendar year peak price dating back
to 1998. For the end user it is more often in the Oct-Nov time frame when
prices reach low levels to lock in long term needs. The Dec Mar corn spread
is at 10 cents carry. At 2.85 spot cash prices, the cost of carry is 3.1
cts per bu per mth or 9.3 cents. Anything less than 9.3 is a warning flag
to move cash corn on hedged bushels and have your pre planned re ownership
plan activated.

LDP: Both the 6 and 7 year LDP average peak for corn has been Oct 11th
while soybeans finds its peak in a range of Oct 14th through the 27th.

Export Sales: It is our belief much of the present sales have been front
loaded to avoid high cash prices in the March-April 2007 time frame.
Barring an Argentina harvest (March 2007) disaster, sales for the third
quarter of the 2007 calendar yr are expected to be softer than normal.

90-10 Odds: From the Oct USDA crop report to the Nov WASDE report, odds are
90% favoring an ave increase in production of 110 mil bu. Those odds sink
to 70% from Oct to the Jan annual with an ave increase of 131 mil bu.
Six to Ten Day and Two Week Forecast: project continued interruptions
primarily for an already lagging east Corn Belt harvest.

Five Year Ave Cash Price: The five year ave cash price for corn for the
month of month of Oct $2.05, month of Dec $2.11.

Corn Technicals: Dec futures close is 3144 vs last Friday's 2710, up 15.5%
for the week. Our key custom Moving Averages are 2880, 2810 and uses a 2600
bull to bear pivot point. March futures close is 3240 vs last Friday's
2840, up 14% for the week. Our key custom Moving Averages are 2980, 2930
and a 2700 bull to bear pivot point.

Trade Position: Fundamentals have caught up with technicals and paint a
bullish scenario into the winter of 2006-07. World end stocks to use are in
a unique class and have very close company with the "other starch", wheat.
Our long range obj on July 2007 corn futures remain unchanged from our
August release of 3400-3600. Without out any major surprises in the March
2007 time frame, we are expected to be busy moving all 2005-2006 cash crops
and hedged aggressively our anticipated 2007 corn production. The present
2.00 corn-to-bean ratio is overwhelmingly in favor of planting starch crops
over soybeans.

Soybean Fundamentals: Stellar weekly export sales added strength the
recently fired up technicals in soybeans. As far as the USDA October World
Ag Supply Demand Estimates released on Thursday, in a word, bearish. Bigger
crop, bigger domestic and world stocks. Aggressive export demand is key
support as well as today's technical and ratio induced buying of beans and
soybean meal. S America is estimated to be a competitive force in the world
export market beginning in March of 2007.

Export Sales: only one month and a week into the 2006-07 marketing year and
sales of soybeans to foreign buyers have 408 mil bu vs last years 240 mil
bu and three yr ave of 325 mil bu.

60-40 Odds: From the Oct USDA crop report to the Nov WASDE report, odds are
60% favoring an ave increase in production of 40 mil bu. Those odds sink to
50% from Oct to the Jan annual with an ave increase of 54 mil bu.

Soybean End Stocks: The 2006-07 domestic end stocks are est at 555 mil bu vs
449 mil bu last yr. Prior to 2006, five yr ave end stocks of 241 mil bu.
World stks of soybeans for 2006-07 are estimated at 55 MMT vs 52 MMT last
year. The five yr ave has been 42.2 MMT. World end stocks of soybeans have
increased 77% since the year 2000.

Soybean End Stocks to Use: The projected domestic end stocks to use are now 18%
vs 15.6% last year and 8.4%, 2001-2005 ave. Globally a level of 18.9% vs
18.7% last yr and 16.3% from 2001 to 2005 ave.

Five Year Ave Cash Price: The five year ave cash price for soybean for the
month of Oct $5.53, month of Dec $5.61.

Soybean Technicals: Nov futures close is 5914 vs last Friday's 5640, up
4.8% for the week. Our key custom Moving Averages are 5600, 5580, and bear
to bull pivot point at 6000. January futures close is 6054 vs last Friday's
5776, up 4.7% for the week. Our key custom MA's are 5850, 5790 and bear to
bull pivot point at 6090

Cash Soybeans: The Nov-Mar futures spread is 24 cents. With the spot cash
market at $5.55 per bu, cost of carry per mth is 4.7 cts/bu/mt or .19
cents. If the spread were to fall back below 19 cents, then its an
indicator that it cost more to store soybeans than to sell to the cash
market. Use this present rally to sell any small overages which will not
fit into your long term cash marketing plan.

Trade Position: Fundamentally we remain bearish to soybeans and the Oct
WASDE report only reaffirmed our conviction. Technically we are more
bullish than bearish. Our long the Nov and Jan futures objectives were
achieved Thursday on the back of the corn rally. We remain long the soybean
oil and have resting orders to buy the soybean meal but on a considerable
pullback. We need to note, Friday's high in the Jan futures was against the
bear to bull pivot point.

Wheat Fundamentals: USDA dropped Australia wheat production by 8.5 MMT and
projected exports by 5 MMT and its end stocks to 2.44 MMT vs carry in stock
levels of 9.27 MMT. Ukraine wheat farmers are up in arms over the countries
decision to place a partial embargo on wheat exports. The Australian Wheat
Board took less than 24 hours to announce it will honor wheat export sales
off the east coast with 2005 stocks vs its Wed announcement of suspending
east coast exports. And why not, the 2006/07 marketing yr will be the first
yr dating back to 1990 when exports are expected to exceed annual
production. How is this possible, fairly easy when you consider Australia
carried in 9.3 MMT of old crop wheat vs a previous 6 yr ave of 5.6 MMT. If
Australia follows through with the 11.5 MMT export program, its end stocks
are projected at 2.4 MMT vs its 3.1 MMT for the crop disaster mkt yr of
2002/03.

On Monday, Japan announced its weekly tender would be 40% of normal
because of high USA prices, S Korea said it would stay sidelined until
prices correct to more in line with supply demand economics. On Thursday
Japan bought its weekly wheat but 60% of its normal weekly amount. Signs of
economic rationing for USA corn and wheat arrived this week.

Odds from Oct to Jan: Odds are 1 in 10 that the Jan annual report may have
larger wheat production and 50% odds of an ave of 11 mil bu less.

End Stocks: The 2006-07 projected end stocks of 418 mil bu compare to last
years 571 mil bu and 491 mil bu in 2003. In 1995 domestic end stocks were
377 mil bushels. World end stocks are estimated at 119 MMT vs 147 MMT last
year. Want to find world stocks tighter than 2006-07 projections? Fall all
the way back to 1981's 113 MMT. But present projected end stocks to use
have a much different view than in 1981.

End Stocks to Use: The projected 2006-07 world end stocks to use are 16.5% vs
last years 19.9% and 2003's 18.9%. In 1981 end stocks to use were 20.8%. As
covered in the corn section, starch stocks are at record tight stks to use
levels dating back to 1980.

Export Sales Are Hurting: when the US places nearly 50% of annual use on
exports and they are performing poorly, timing may work in the USA's favor
for those foreign buyers who may depend on Australian supplies after its
harvest. 2006-07 export sales are now 20% behind last years pace and at
only 412 mil bu, pale in comparison to the previous three yr average of 547
mil bu. First quarter marketing year wheat exports are down 21% and since
1987-88 had one other year which began as weak, only to wind up 15% below
the USDA target. 15% below USDA's present target of 925 mil bu is 786 mil
bu. USDA did raise its export target by 25 mil bu in Thursday's WASDE
report counting on picking up some of Australia's projected lost export
business. Question is, will Australia and Ukraine allow such strong prices
to pass them by before March of 2007?

Cash Wheat: Spreads favor moving spring wheat and KCBT HRWW. However, spreads are
still favoring to store CBOT's SRWW wheat. Given the tightness in domestic
and world stocks, Allendale's research suggest the peak for the cash market
for wheat could arrive in late March early April 2007.

Wheat Technicals: DECEMBER CBOT SRWW futures close is 5254 vs last Friday's
4640, up 13% for the week. Our key custom Moving Averages are 5180, 4890
and 4520. DECEMBER KCBT HRWW futures close is 5430 vs last Friday's 5016,
up 8.2% for the week. Our key custom Moving Averages are 5320, 5180 and
4990. DECEMBER MGEX spring wheat futures close is 5216 vs last Friday's
4796, up 8.7% for the week. Our key custom Moving Averages are 4900, 4840
and 4790.

Five Year Ave Cash Price: The five year ave cash price for SRWW for the
month of month of Oct $3.51, month of Dec $3.51.

Trade Position: We remain long CBOT, KCBT and MGEX wheat futures based on
the tightness in world corn and wheat end stocks and technical drive.

Allendale Lean Hogs: The main point to note here is packers have found even
with huge daily kills this week (record 425,000 head kills both yesterday
and today) this wholesale pork market is holding. Next week's kill be the
true test though as it typically holds the biggest kill from September
through October. Next week is also the time when cash hog prices typically
begin their big nosedive into winter. The biggest pork production week of
year is typically around the first week of December when cash hog prices
typically bottom. To get a visual of this internet subscribers may view
slaughter, weights, production, and price graphs on the Special Reports
page inside our website. At the CME traders have attempted to push the
December higher for two days in a row. The mind set is now that October has
expired the December comes up to bat with a $4 discount to current cash hog
prices around $67. In the big picture that discount is needed as cash hogs
typically break from here into December as noted previously. We are fully
hedged on marketings through the rest of the year using the December
contract.

Allendale Live Cattle: Beef packers noted this week plans to reduce kill
hours. Their concerns on processing margins are well founded as the spread
between wholesale beef and cattle prices is now back to the narrow spread
posted in the first quarter of the year. During the first quarter this year
Tyson, the nation's largest packer, lost a huge $188 million. #3 Swift lost
$53 during that time and #5 Smithfield posted a small $3 million loss. With
the very low capacity utilization in these old plants (fewer cattle going
in the door) compared to 2001 - 2003 levels any narrowing in the cattle to
beef spread is magnified. The interesting thing here is though they
announced production slowdowns earlier this week we still have yet to see
them. In the big picture we are still very concerned about this runaway
corn market. Though cash cattle prices, now at $88, may be near the low end
of our original estimates any good bounces in CME prices should now be used
to establish speculative sales and hedges.

Corn Fundamentals: Strong weekly export sales announced Friday for corn lent strong fundamental support on top of the adjustment the USDA presented on Thursday. USDA dropped corn production under 11 bil bu and end stocks under 1 bil bu as a result of smaller planted acres. USDA dropped demand by 25 million bu vs the Sept crop report while dropping production by 209 mil bu. S Korea has sent the first warning shot across the bow of USA export demand prices by purchasing 88% of it two day total purchase of 477 K tonnes from China.

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