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Trade needs convincing of a summer rally

As a reminder, the CBOT futures exchange is closed Monday April 28th in
observance of Memorial Day with the E-CBOT available Monday night and open
outcry side by side electronic trade reopening Tuesday at 9:30 am central

Wheat Fundamentals: The world wheat trade spotlight is on the 988,000 acres
of crops lost in the Ukraine, and dry weather stress developing in Russia
and Kazakhstan. Add to this bullish development the fact the USDA is
projecting world wheat stocks to be at 27 year lows even before the weather
problems arrived in Ukraine, Russia and Kazakhstan. Include the severe
weather in the southern Plains on Thursday which may have brought on a
serious case of lodging. As long as we are adding to the bullish side,
strong new crop wheat sales for the week ending May 17th even though old
crop had net cancellations. Add in the International Grain Council reducing
its world production outlook from 623.4 MMT to a new smaller level of 620.6
MMT. Add to these weather problems the fact Western Australia (the main
wheat growing region) remains dry and very little if any relief is
forecasted for the next full week. Western Australia accounts for 34-38% of
the country's annual production. Surprising is news on Friday the
Australian Crop Forecasters suggest the country is on its way to producing
a near record crop of 26 MMT even though the USDA is suggesting a crop of
22 MMT. This could be a ploy on Australia's part to suggest world demand
can consider Australia as a potential supplier after drought cut its 2006
crop in half. Pakistan was prepared to export 1.3 MMT of wheat and was
targeting India as a prime target on Tuesday but canceled the plan less
than 24 hours later based on inflation fears. India was looking to import 1
MMT of wheat immediately but has backed off its demand to a level of
300,000 to 400,000 tonnes as it suggest it has managed to pry supplies from
its farmers while visiting the US discussing past wheat quality issues.
Anticipate bearish talk to develop as prices reach higher and the trade
suggest the US is pricing itself out of the global picture. The main
problem with that particular thought process is, the competitive landscape
is waning as crop weather problems are growing across the globe.

Dec CBOT Wheat Futures: revised May 22, 2007, Allendale's Dec wheat futures
price projections suggest a harvest low of 4750 and then rally to slightly
more than $6 only to correct to $5 before Dec futures expiration. This
information may help us with our marketing advice just below.

Wheat New Crop Hedges/Marketing: presently Allendale has its new crop
hedges mainly in the July futures with a small amount in the Dec 2007
futures. We have resting orders to add another 10% new crop wheat hedges in
the Dec futures at a level of 5520 to bring our total hedge amount to 70%
of anticipated 2007 production. The level designated is a result of our Dec
2007 futures price projections found within our internet site. The July-Dec
wheat spread is 24 cents carry. At the Minneapolis Grain Exchange the
National soft wheat Index has a 7 cent inverse for cash between July and
Dec suggesting wheat be sold off the combine. So we have futures suggesting
there is 4.3 cents per bu per mth carry while the cash market suggest a
need for four cents. This development suggest it may be wise to sell the
harvest to the elevator (handle once) but you may also want to consider
purchasing a Dec 5000 Call and Sell a Dec 5600 call for 19 cents for
reownership based on tight projected world end stocks and the potential for
corn and wheat futures to rally this summer.

Memorial Day Study: The parameters are as follows; the time frame is from
1:15 pm on Friday to the following Tuesday's 1:15 closing bell. Our
question is what are the odds for futures to close higher or lower, the
average gain or loss and the range high and low. The history spans the most
recent 10 years with specifics for the most recent two bull rally years of
1996 and 2004.

Other than Dec wheat, each contract has odds suggesting of
the ten years researched, 60% of the time Tuesday has had a tendency to
close lower than where futures prices closed the previous Friday. Corn
futures tend to stay within a tighter range from high to low vs the extreme
high low ranges for soybeans and wheat. New crop corn and soybean futures
in 1996 and 2004 have been successful in closing higher, but the same can
not be said for old crop corn and soybean futures. The July soybean futures
in both 1996 and 2004 rally years had disappointing results by closing
lower on Tuesday's close vs the previous Friday's close. Those willing to
venture into high risk could sell July soybeans and buy Nov beans as a
spread but realize this is a holiday only trade and not suggested to carry
any longer than the close of pit trade on Tuesday. Only Dec wheat has had
50/50 odds and is the only contract which spanning over the recent ten
years which yielded a positive average gain of 2 cents.

However equally
important is how rewarding vs how damaging the trade has been treated. With
its 50/50 odds the most significant reward has been 26 cents per bushel, but
within that same ten year span had one year with a loss of 10 cents per bu
or more than a two to one reward to risk. To finish is how each 2004
contract finished higher at the close of the open outcry trade on Tuesday
with the exception of the July soybeans. Discuss the data above with your
Allendale representative to decide what may fit your specific interest and
have orders ready to be place on the close Friday and please be certain to
exit the trades at the close of the open outcry session on the Tuesday
after Memorial Day.

Observation: Corn and soybean sales were strong enough to meet the minimum
amount needed on a per week basis in order to reach USDA's export target,
not so for the wheat. With net cancellations for old crop it appears as
little as 7 to as much as 30 mil bu could be added to the carry in stocks
for 2007-08. Equally interesting is the pace of new crop corn and soybean
sales. Today's 83 million bushel new crop weekly soybean sales brings total
new crop sales to 123 million bushels. It ties the record 123 million
bushel year to date total from three years ago in 2004. That is above the
five year average of 61 million bushels for this week. 2004/05 actual
exports ended at 1.097 billion which is the record. USDA suggests 2007/08
exports will be 1.080 billion. New crop corn sales to date are 95 million
bushels. This is the largest new crop sale for this week since 1995 when
they totaled 203 million bushels. Last year, during this week, they totaled
24 million. The five year average is 16 million bushels. 1995/96 corn sales
were 2.228 billion which was the 4th highest ever. USDA is using 1.975
billion for 2007/08 new crop.

US Census Bureau Crush: Its April soybean crush estimate is 144.9 mil bu
which is bearish when comparing the result to a pre release estimate of
145.9 mil bushels vs 155.9 bu for the month of March and 136 mil bu one yr
earlier. Dating back to the 1999-2000 marketing year, each April crush
reported by the Census Bureau has been weaker than the month of March but
then each May rebounds higher than the April crush, with the June lower
than the May, very much a roller coaster with its ups and downs. Based on
the pace of crush thus far in the 2006-07 marketing year, USDA needs to
raise soybeans used for crush by 22 million bushels. Of the first 8 months
data, only in the month of Feb was the crush level below USDA's projected
increase of 1.8% above yr ago levels of 1.8%. Thus far the ave monthly
increase has been 3.8%.

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: Dec corn needs to find the strength to lift above the #1 MA
equally as much as Dec KCBT wheat needs to close above its Pivot point to
convince the trade, the grains and oilseeds are preparing for its summer
weather rally. We would suggest a minimum of two to three consecutive
closes for each to confirm a near term base. Wheat futures could be staged to have a contra seasonal rally in front
of the bulk of the wheat harvest, just as 2006 corn futures did.

Weekly Support and Resistance: Based on the immediate weekly charts, corn
has support at 3300 and resistance of 4000, soybeans support at 7924 and
resistance of 8140, CBOT wheat support at 4690 and resistance of 5070, KCBT
support at 4404 and resistance of 5010, and MGEX support at 4600 and
resistance of 5404.

Soybeans Fundamentals: Smaller acres than last year, smaller crop, and
smaller projected end stocks. The long term trend for soybeans still
remains very much up according to our Allendale Advanced Charts but also
reminds viewers of the chart gap below. It is important to be aware, much
of the weeks strength in futures came as a result of the strength in
soybean oil and Malaysian Palm oil futures. Equally important is news of
Brazil suggesting the high price of soybean oil may crimp profit margins
for biodiesel producers using soybean oil as its primary feedstock. USDA
has been suggesting the break even for biodiesel is when soybean oil
futures reach 30-31 cents per pound. Fridays closing price is now 3584 with
monthly chart based resistance of 3419. We shall see by months end, next
Thursday if 3419 remains resistance or new support.

Old Crop Soybeans: The average cash value of Midwest soybeans is $7.39 per
bushel which suggest a cost of carry of 6.4 cents per bu per month. On
Friday 05-18-07 Allendale advised to lift the July hedges against the 2006
inventory and sell the complete inventory to the cash markets. Historically
late April-early May has been one of the cash price peaks during the
calendar year. We recommend re owning via futures and or calls but on a
pull back in futures to allow for a technical correction from overbought

November Futures Price Projections: Fresh update for both Nov and July
futures price projections have been released by Allendale. According to
Allendale's futures price projection for November futures, the 7500
downside target has been met and looks towards futures a $8.75 high by
July-August, just in front of the soybean pod fill growth stage, correcting
to near $7 in front of harvest and then correcting to $7.75 before
expiration. Use these ranges to hedge new crop, cover hedges with calls on
the correction for the producers and end users buy puts near the top side
of the anticipated highs. Whether hedging as a producer or end user
(crusher) ask your Allendale Representative to run a minimum of two
scenarios using options strategies against futures hedges. We have the
available software to present potential to you before the position is

Trade Posture: Given the timing of the Argentina soybean harvest and US
planting progress, fundamentally we are more incline to be bullish soybean
futures than bearish. Based on our price projections, we have written new
orders to buy soybeans on a technical correction.

Corn Fundamentals: Neutral weekly corn sales, a fresh purchase of US corn
by Taiwan when suggesting it would consider the US or Argentina as the
supplier may have spoken volumes for just how much corn Argentina has
remaining for export. Wheat, corns cousin, is now providing support for
corn futures and without it may have permitted corn to break downward out
of its long standing range of trade. New crop corn sales are very much
bullish, add in the fact Argentina suggest it only has 2 MMT of a 22 MMT
corn crop left for new export sales and continued rumors of China stepping
out of the corn export arena and then look at the very big picture of lower
trending world corn and wheat stocks and the formula was there for a better
days ahead for corn. The present range of trade of 3650-3820 for July
futures and 3630-3824 for Dec futures. Since 5-15-07, Dec futures have
touched 3820 three times. Triple tops are typically regarded as made to be

July Corn Futures: Allendale has released its revised July corn futures
price projection. Please check within our internet site under the "Price
Outlook" toggle on our home page. Those subscribers which are not utilizing
our internet service may have the price projections either e-mailed or US
mailed to them by calling Allendale at 800 551 4626. Our immediate plan is
to place a firm offer to sell the 2006 corn inventory when futures reach $4
but will provide exact details as we draw closer to the price projection.

Dec Futures Price Projection: From this point forward, Allendale estimates
Dec futures low at 3400-3600 and high of 4000-4200 under average weather
conditions. Use this price range for end use and marketing your 2007 corn
production. Allendale suggest the low end of the range objective may have
been met. Allendale has update new Dec corn price projections for you and
found within our "Price Outlook" on the home page of our internet site.

Old Crop Cash Marketing: Historical research data suggest the timing when
to begin to sell cash corn in tight end stock years is late April to early
May. July corn becoming has recently been more able to hold its inverse
over new crop Dec futures. Firming basis suggest a positive cash trend for
old crop corn. Allendale suggest cash sales could be made as late as June
but before nationwide pollination. The average cash value of Midwest corn
is $3.57 per bushel which suggest a cost of carry of 3.9 cents per bu per
month. We remain hedged in the July and will continue to keep watch on the
cash carry and Allendale July futures top side target of $4 for signals to
begin to move old crop. New crop marketing advice is found within our Hedge
Advice page of our Allendale Advisory report. Our new crop hedges are
covered with bull call spreads.

Soil Moisture: According to NOAA/USDA the states with slightly dry
conditions is Georgia, Alabama and northeast Mississippi. The NOAA/USDA has
the greater Midwest as favorably to abnormally moist. Within the "Weather
Links" of our website, subscribers can scroll down to find the Crop
Moisture Index which measures down to five foot and see how there is not a
single Midwest region which is experiencing dry soil stress. Kansas, much
of Missouri and south west Iowa have abnormally moist top soil conditions.
However there is a great deal of variance between what is real and what is
perceived. At the present, the corn and soybean trade continues to support
futures based on the perception the east cornbelt is too dry. Any hint of
rains missing IL, IN, and or OH is expected to rally corn futures.

Trade Posture: We remain optimistically bullish to corn futures on tight
domestic and world stocks, greater demand for new crop corn vs yr ago
levels and strengthening of the July-Dec bull spread. Technically we are
neutral to futures until they breaks out of its present range of trade of
3650 to 3820. We are neutral to new crop futures until Dec futures can
break out of its trade range of 3630-38240.

Allendale Lean Hogs: Packers ran a large kill this week just shy of 2.0
million head. For this time of year that's pretty darn large. It also puts
more pork on next week's market than it needs. Keep in mind this week's
production is for a lower demand time frame ahead. Having said this bad
news we have to ask if its time to turn tail and run for the hills.
Typically the thing which saves the hog market and makes the cash hog peak
in June is the sharp drop in market ready numbers over the next four weeks.
Compared to this week's kill we will see weekly numbers in June drop by
80,000 to 100,000 head. With that in mind we are now recommending to lift
the hedges places on the June contract for Tuesday morning. Currently we
are 50% covered at an average price of $78.11. We will note many deferred
contracts are in downtrends. Further hedge coverage on out will be extended
on short term bounces. For speculative trading we had recommended the
June/October spread which closed at $9.20 today. Traders following that
position may have profit orders in at $9.50.

Allendale Live Cattle: This week rejected the two previous weeks of cash
cattle gains and confirmed prices are in a downtrend. Subscribers to the
Advisory Report through our website can access the graph of cash cattle
prices in the Special Report section. That chart shows a five year average
line which suggests continued declines until July. On the futures end the
June contract is in a sharp downtrend while other deferreds are generally
sideways currently. The cattle slaughter and beef production charts, also
on the Special Reports page, show supplies typically remain at these high
levels for seven more weeks. Along with heavy supplies ahead we also have
to deal with reduced demand. Memorial Day weekend is the big holiday for
beef demand. It's a three day weekend and temperatures are ideal for
outdoor grilling. By the second half of June summer heat is usually a
deterrent. Now that cash cattle have returned to the normal trend for this
time of year (down) we have to ask if futures prices are priced correctly.
June futures are implying cash cattle at $93 while August futures suggest
cash cattle will hit $90 in that month. The old standard is for cash cattle
to fall 10% or $10 from their spring high to summer lows. Figuring the
spring high was $100 both of those factors would equal $90. That number
also fits into the price outlooks generated by our fundamental models. If
there is any question we have on futures pricing it is with the October
contract. Larger February and March placements could push a few extra
numbers into early fall finishing.

Our models suggest the October may get
down to $92.50. In the big picture our downside price target of $91 on the
June was filled today. We are adequately hedged for summer marketings at
with 75% coverage on the June contract, 50% on the August, and 75% on the
October. For speculative positions we had recommended bear spreading by
selling the October and buying the February. That position is working
slowly but surely.

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.

As a reminder, the CBOT futures exchange is closed Monday April 28th in observance of Memorial Day with the E-CBOT available Monday night and open outcry side by side electronic trade reopening Tuesday at 9:30 am central time.

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