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Crop size is a key question

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

Observation: For CBOT Dec wheat, Wednesday was the first time since Aug
28th when the futures close breeched the # 1 Moving average but not the # 2
MA. On Thursday the #2 MA was breeched during the side by side trade but
futures did close above the 8380 level. A close below the #1 MA by Friday
and directly on the #2 MA and the positive news for the weekly chart
traders is a Friday close above last Friday's close. Using the upward trend
which began on 7/3/07, futures could retrace to a level of 7180 to test the
up trend. There was doubt on Thursday if corn could close above last
Friday's closing price but met the challenge with positive results.

Can They Get Bigger: the questioned asked is if the corn and soybean yield
increased from the August to September USDA crop production report, can
these crops get bigger by the time we happen upon the October crop report?
The answer is yes for corn and a 47% chance for soybeans.
There have been 20 years dating back to 1965 when USDA found greater
corn yields in the September corn crop report vs the month of August.

recently was in 2005 with an Aug to Sept increase of 4 bushels per acre and
then another 2.9 bpa increase in Oct. In 2004 there was a 1 bpa increase
from Aug to Sept and then a 8.5 bpa (record increase) from Sept to the
October report. Of the 20 years when there was an Aug to Sept increase, 17
years there was an increase in the Oct report or 85%. The three years when
the Oct yield was trimmed it was by an 1.3 bpa in 2006, 1.4 bpa in 1990 and
0.9 bpa in 1968 thus the frequency is very wide. Over the most recent ten
years when USDA either raises or lower the bushels per acre for corn from
the Aug to Sept crop report there has been 70% odds of an increase of 3.1
bushels per acre and could suggest a yield of 158.9 bpa in the Oct 2007
crop production report. The high end of the range has been 8.5 bpa for a
potential of 164.3 bpa and a low end of .6 bpa for a potential 156.4 bpa.
To surmise, odds overwhelmingly favor an increased corn yield when USDA
releases its findings on October 12th. Discuss you trading plan according
with your Allendale representative.

Weekly Export Sales: weekly export sales of 78.4 million bushels of wheat
exceeded sales of 76.3 for the week ending 7/19 and nearly twice pre
release expectations. The revised export target USDA released within its
Sept WASDE report on Wednesday calls for 1.1 billion bushels for the
2007/08 marketing year. With 71% of the marketing year remaining, sales
have reached 66% of the target and compares to a five year ave level of 45%
of target. Sales have reached 713 million bushels vs 326 a year earlier and
are 104% above the most recent 5 year average. The single largest buyer for
the weekly sales report is Egypt at 21.8 million bushels or 28% of the
total sales.

Weekly corn sales of 40.9 million bushels compares to the most recent
five week ave of 11 mil bu and 10 week ave of 18 million bu. 2007/08 corn
sales have reached 656 million bushels vs year earlier levels of 496
million bushels and 71% greater than the 5 year ave. With 98% of the
marketing year remaining, sales have reached 31% of its 2.25 billion bu
target vs a five year ave of just 18%. South Korea and Japan were the
biggest buyers in the most recent weekly report.

Weekly soybean sales of 12.7 million bushels compares to the most
recent five week average of 4.7 million bu and most recent ten week average
of 5.9 million bushels. 2007/08 soybeans sales have reached 298 million
bushels and compare to year earlier levels of 265 million bushels and are
53% higher than the most recent five yr ave. Not to be outdone by corn and
wheat, with 98% of the marketing year remaining, cumulative soybean sales
have reached 31% of its export target of 975 million bushels vs a five year
ave of 23%.

European Commission: has made good on its scheduled release of Thursday to
announce to propose the European Union 27 member bloc countries to reduce
to zero its set aside for 2007/08 vs the policy proposal of 10%. World
stocks of grain are tight and with two consecutive years of weather related
problems, the EC had little choice to make the recommendation. It is now up
to the 27 members to approve or reject the proposal. The proposed set aside
if approved is expected to add 13-15 million tonnes of grain in 2008. The
EU will meet early in November to discuss the proposal. Individual farmers
do not have to follow the recommendation but Allendale suggest, if European
Farmers base their decision on futures prices, they could plant fence row
to fence row.

Conservation Reserve Program: USDA Sec of Ag Johanns suggest USDA will
continue to monitor world grain stocks and "could" make a decision on bring
acres into production from C.P. in the next 30 to 90 days. Allendale
suggest the USDA could be watching both Australia and Argentina and how its
actual harvest develops. Remember Australia typically completes its harvest
in the month of December and Argentina in by Jan. USDA could also be
watching how corn harvest materializes in the US and China along with
soybean plantings in Brazil and Argentina and wheat plantings in the US. If
anyone of these "big six" wind up with a disaster, it could make Johanns
decision on C.R.P. easier to defend. As of a matter of fact, the Secretary
made a similar comment before 2007 spring plantings.

Wheat: fundamentals remains very strong as discussed below in the domestic
and global supply demand picture. Turkey added more weight on the world
demand as they suggest they need to import 800,000 tonnes of wheat as a
result of its drought. Australia's crop is expected to shrink further as
the 7 day precip outlook is very dry. Argentina on the other hand has been
receiving beneficial rains and more expected. India's wheat purchases have
cooled but is expected to continue once more is known about the two
southern hemisphere crops. As explained above wheat exports are extremely
strong and do not look for domestic use to give much if any ground as the
2007/08 marketing year is estimated to be the second strongest dating back
to the 2000/01 marketing year.

World End Stocks: at 112 million tonnes (4.1 billion) are the lowest in 30
years. Dating back to 1980 stocks reached a low of 113 million tonnes in
1980 and 1981. 112 million tonnes (down 11%) compares to last years 125 mil
tonnes, 2005/06's 149 million tonnes and 2004/05's 151 million tonnes, a
four year slide is still very much in place. However dating back to 1980
there was a five year slide which occurred from 1999 to 2003 when world
stocks of 205 million tonnes slide to a level of 132 million tonnes by 2003
for a reduction of 35.7%. The present four year slide has had a reduction
of 26%.

World End Stocks to Use: projected to be 15.5% vs 17.2% last year and only
the third time dating back to 1980 to be less than 20%, with an 18.9% level
in 2003. World end stocks to use have never be as tight dating back to 1980
as they are presently projected.

US Domestic Stocks: at 362 million bushels they represent the tightest
stocks dating back to 1980 and lower than the old record of 377 million
bushels in 1995. At 362 million bushels they represent a three slide in
projected end stocks. Most recently there was a four yr slide in US stocks
dating from 1999 (946 mil bu) to 2002's 491 million bushels.

US End Stocks to Use: at 15.8% they are they equal 1995 level which is a
record dating back to 1980. The 15.8% compares to last ears 22.3%. The most
recent steepest drop was an 11% from 2001 to 2002.

Season Average Farm Price: USDA increased the season average farm price by
40 cents on the low and high range to a new level of $5.50-$6.10 per bushel
which is well above the 1995/96 record of $4.55 bu per bushel. It needs to
be noted last month USDA had revised the SAFP higher by 30 cents per

A Disaster: Australia growing season is coming to an end. Hopes were pinned
on producing a 26 million metric tonne wheat crop. Latest estimate now
suggest a crop closer to 15-19 million tonnes because of the lack of rain.
Typically the #2 world wheat exporter, it is now tied with Canada at a
proposed 14 million tonnes as USDA cut 1.5 million tonnes from its export
potential and still above 9 mil tonnes last year and 2.1 million tonnes
below the 2005/06 marketing year. We have known for some time #1 wheat
producer, Western Australia, within Australia has had crop stress. On
Thursday the second largest growing area of New South Wales suggest it is
weeks away from disaster if rains do not appear. The two regions account
for 66% of annual Australia wheat production. The wheat crop is stressed
and the seven day precip outlook for Australia is bleak.

Trade Position: the fundamental facts are world supplies are challenged by
aggressive demand. Lets see if India and or Egypt use the futures price
correction to shop for world wheat. We are willing buyers technically to
the #2 Moving Average levels and did enter the long side of Dec Chicago
wheat futures on Thursday.

Wheat/Corn Spread: Dec hit resistance of 5500 premium the wheat on Tuesday
and had 45 cents profit taken out on Wednesday. By Thursday the spread
closed at 4.98. By Friday the spread closed at 4.97 which based on a weekly
close is viewed as bearish. Nearby resistance is $5, support is at 4.86.

Soybean Fundamentals: feedwheat used as both a good source of protein and
starch has become too expensive and livestock and poultry producers are
leaning more heavily on soybean meal. USDA has reduced soybean oil stocks
by 16% because of strong export demand and biodisel demand within the US.
$79 dollar crude oil has brought speculative demand to the soybean oil for
biodiesel. As Brazil begins to plant its crop for 2008 harvest, farmers in
the center and north region are facing dryer than normal soil conditions.
Typically rains do not appear until the month of October but the trade is
supportive to soybeans based on the present situation. Freeze in Canada
canola country overnight Thurs and more anticipated overnight Friday singed
the crops and is also viewed as supportive to oilseeds. What could trip
futures downward, rainfall in Brazil as they set their sights on a record
soybean crop.

Soybeans World End Stocks: at 50.13 million tonnes (1.84 billion) compare
to last months estimate of 51.63 million tonnes and compare to 63 million
tonnes last year and 53 million tonnes the yr prior.

World End Stocks to Use: projected to be 16.3% vs 21.4% last year and
represent the steepest drop of 5.1% dating back to 1980. 16.3% is still
above the recent 2003 level of 15.3%.

US Domestic Stocks: at 215 million bushels they represent the tightest
stocks dating back to 2003's 112 million bushel and 2006-07's 555 million

US End Stocks to Use: at 7.3% they are lower than last years 18% and
2005/06's 15.6%, close to 2004's 8.6% but well above 2003's 4.4% which is a
record low dating back to 1980.

Season Average Farm Price: USDA increased the season average farm price by
10 cents on the low and high range to a level of $7.35-$8.35 per bushel vs
last month and compares to an ave of $6.40 for the 2006-07 marketing year.

Soybean Oil Domestic Stocks to Use: presently projected at 8% vs last years
12.3% but still above 2003's 6% and just below 2004's 9.1%. The lower
projected US end stocks of 1.735 billion pounds compare to the previous
months estimate of 2.225 billion pounds and yr earlier levels of 3.091
billion pounds. USDA's season average farm price was increased to an
average of 35 cents per pound vs the previous months 34 cents per pound.

Trade Position: we are willing buyers of soybeans, soybean meal and soybean
oil because of the outside influence of crude oil, feedwheat, evident
smaller than average soybean end stocks and Brazil's weather problems.

Corn Harvest Reports: Needham, IN getting 125 bushel corn vs. the average
of 165/170. He thinks his beans are going to be hurt in a big way. Neighbor
running beans and doesn't think he is going to get a field above 30 bushel.

West central Illinois first field did 217 dry which was a bit better
than expected. Not sprayed with headline. Convention seed. This field has
been in corn for 9 consecutive years.

Bird Island, MN-harvested early beans expecting 30-35. Actual is
running 48. Thinks his late beans should be 55-60.

Litchfield IL - this is the worst are in the state of IL. Yields are
averaging 120 v 105 estimated and 145 normal. Conventional seed - no
headline. Way better than expected. We had no rain in the month of August
and 100 degree temps. Its amazing. Still think beans will be a wreck.

Yorkville IL - good rains in August. Sod farm harvested early group 00
and 01 beans - 3 fields harvested went 60, 70, 72.

Carlyle IL - Finished corn 155 avg vs 140 expected, 140 nrml. 3 stack
in bottom ground 220. very dry and hot August. no fungicide sprayed.
shocked at yields. beans will not do well. three fields = 36 vs 40
preharvest estimated.

Joice Iowa, just off 1-35 and 15-20 mi. south of Minn. boarder. Did
field of beans and 13.3 moisture and 59 yield. He was expecting/satisfied
with 55. Corn being taken out in that area at 16.4% moisture but have no
yield to go with that.

World End Stocks: at 105.44 million tonnes (3.87 billion) compare to last
months estimate of 51.63 million tonnes and compare to 102.23 million
tonnes last month and last years 101 million tonnes. 105.44 million tonnes
are the fourth tightest dating back to 1980 with the record low of 89
million tonnes in 1983.

World End Stocks to Use: projected to be 12.3% vs 12.4% last year. At 12.3%
end stocks to use they represent the tightest on record dating back to

US Domestic Stocks: at 1.675 billion bushels they compare to old crop
stocks of 1.142 billion bushels and well above the tightest on record
dating back to 1995's 426 million bushels.

US End Stocks to Use: at 13.1% they are above last years 10% but lower than
2005/06's 17.5%.

Season Average Farm Price: USDA left unchanged the season average farm
price from last month's $2.80-$3.40 per bushel vs last month and compares
to an ave of $3.03 for the 2006-07 marketing year. Domestic end stocks
experience an increase of 32% vs last year and yet the season average farm
price only reflects a 4.3% drop.

Trade Position: Allendale has written new orders to buy Dec and Mar corn
against building trendline chart based support. Fundamentals remain
supportive for corn as long as projected end stocks remain below 1.7
billion bushels and domestic and world wheat end stocks remain tight, which
they are.

Lean Hogs: There is some good news to report here. Cash hogs may have
confirmed a bottom. The CME lean hog index for Tuesday, reported on
Thursday may have stopped the price break at $63.85. We project the index
for cash hog trading through Thursday at $63.95. That will be reported on
Monday. This is not a big price jump but its clear corn and soybean
harvesting may have finally put the seasonal trend back in place. That
trend suggests a moderate price rally into early October before making the
yearly bottom in early December. A week ago we made recommendations to
reapply some hog hedges that were lifted on the December contract. That
order was filled today. Additionally we had placed an order to start hedges
on the February contract which were filled yesterday. We will keep our $65
to $67 downside target for December futures.

Live Cattle: At the time of this writing no significant cash cattle trading
has been seen in the central and southern plains. Bids are $92 asking
prices are $95. Some are suggesting feedlots would take $94 which would be
$1 lower. We have to note wholesale beef prices ended lower for the week.
Additionally packers reduced today's kill to 110,000 head which was under
125,000 head. Essentially packers are receiving less money for the beef and
are taking action by reducing kill. Cash cattle should trade at $1 lower
and may even take a $2 cut when its all said and done. Having said that
bearish news the CME trade is not ready to jump ship here. CME prices hit
support and bounced off okay today. The trade believes market ready cattle
numbers will tighten a little more than demand has been strained.
Essentially they are looking for this cash cattle break to be limited. We
are as well. In other news the comment period for USDA's decision to let
more Canadian cattle across the border has ended. Today it was announced
cattle over 30 months of age from Canada would be allowed into the US. They
have placed an age limit of cattle born after March 1, 1999. This allows in
cattle that are 8.5 years of age or younger. In 1997 Canada implemented a
ban on feeding ruminant parts to other ruminants in order to deter any
potential BSE outbreaks. The idea is any feed produced in 1997 should have
been fed by the end of 1998. We stopped importing all cattle from Canada in
May of 2003 when they had their first case of BSE show up. We started
allowing in cattle under 30 months of age in July of 2005. In 2002, the
last full year of unimpeded cow and bull imports, we brought in 222,000
cows and bulls for slaughter. USDA estimates in 2008 the number will be
75,000 head and progress to 279,000 head by 2017. The rule be implemented
on November 17th. This will not have any market impact as the expected
amount per month is only 6,250 head per month. Last night we noted target
prices for feeder cattle sales would be $116.50 on the January or $114 on
the March. Downside targets would be $113 and $110.50 respectively. We are
not calling an ultimate top here but are recognizing feeder futures may
finally be near the high end of the price range. We remain long term
supportive to the February 2008 live cattle contract and look for slowly
rising prices into that time frame.

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.

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.

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