Allendale Wrap-Up for Business Day 9/24/07

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1 Allendale Wrap-Up for Business Day 9/24/07 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. A detailed technical look at the grains and livestock are available within our Allendale Advanced Charts. Corn Futures Close Moving Ave #1 Moving Ave #2 Pivot Last Wks Close Dec Mar Bean Futures Close Moving Ave #1 Moving Ave #2 Pivot Last Wks Close Nov Jan Wheat Futures Close Moving Ave #1 Moving Ave #2 Pivot Last Wks Close Dec CBOT Dec KCBT Dec MGEX Observation: March corn futures have closed above its pivot point which may switch trade momentum from neutral to bullish, but Dec corn faltered only a day after making the leap on Friday. See our Allendale Advanced Charts as it points out Dec corn has hit 50% of the June high to July low, based on this development, Dec corn needs to hold The Allendale Advanced Charts also point to the near triple top for Kansas City Board of Trade Dec wheat futures. They old saying, "triple tops are made to be broken". Corn Fundamentals: as corn futures rallied late last week and in front of the quarterly grain stocks report to be released by the USDA this Friday, farmers did a good job in selling corn off the combine to the country elevator sector over the weekend. Most likely these are bushels farmers realize that will not fit in on farm storage, and rather they pay a premium to the in town elevator minimum storage, timing was right. The good news basis did not take a dive at the Gulf but soybeans is another matter. Strong domestic demand and exports continue to support corn and we would not rule out a second consecutive year of a contra seasonal rally. Pressing corn is better than expected yields from the triple stack corn genetics. Present good to excellent crop conditions are 9% better than the five year average. Since 1965 USDA increased yield 20 times from the August to Sept crop production report. Of those 20 years, USDA continued to increase the corn yield from the Sept to October crop production report 17 times. Technically futures did manufacture a higher weekly close and did penetrate its key neutral to bullish pivot points.

2 Marketing: dating back to 2000 if you seek a seasonal tendency when cash corn prices peak it has been the Dec time frame. With the potential for a domestic stocks build up, cash markets are willing to pay sufficient storage out at least to the month of Fed. We remain hedged in Dec futures. Allendale did hedge its first 10% of its anticipated 2008 fall corn production as 4220 was reached on Monday, 9/24/07. The next target is defined within our Hedge Advice page. Trade Position: Allendale has written orders to buy Dec and Mar corn against building trend line 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. See days of supply table below. Days Supply: we have discussed the implications of the tightness in the days supply of corn, soybeans and wheat. To possibly put in a much simpler, clear perspective we have place the data in the tables below. From the world's viewpoint corn and wheat supplies have never been smaller. From the USA viewpoint wheat supplies have never been smaller dating back to 1993 and equally amazing is to know just last year the days supply of soybeans had reached a record and in one year projections now suggest we are 10 days away from the record low. Days of Supply of World Grains (dating back to 1993) Greatest Smallest Wheat Corn Beans Days of Supply of USA Grains (dating back to 1993) Greatest Smallest Wheat Corn Beans We Need to note when we released the table on Friday 09/21/07 we were interviewed by two major business news companies the following Monday, addressing the global supply, of which one of the companies referred to the situation as critical Soybean Fundamentals: support in the soybeans comes from drier than normal central and northern Brazil as they begin its planting campaign. Support also comes from new developments from China, see section below. Support comes from soybean meal which is a international protein alternative for expensive feedwheat. Pressure comes from an active US harvest, increasing crop conditions and the ultimate threat of a second consecutive record crop from South America. New Crop Soybeans: central Midwest basis levels wider than average but do not offer sufficient carry from Fall to Dec delivery, signaling the market is not willing to pay to store soybeans. The economics suggest to move the soybeans and store the corn. Realize of course crop developments in South America could have direct impact on the potential weakness or strength of soybean futures and cash developments with the US this Fall and early winter. Since 2000 there has been a tendency for the peak cash price received on a national level to occur in Nov-Dec time frame. Trade Position: we are willing buyers of soybeans, soybean meal and soybean oil because of strong domestic and foreign demand, steep decline in domestic and world projected end stocks for soybeans and Brazil's weather problems. China: new developments from China on Monday as they announced they will follow through with reducing its import tariff on soybeans from 3% to 1% for the next three months. They confirmed they anticipate importing each month October through December 3.5 to 3.6 million tonnes of soybeans and a minimum of 300,000 tonnes of soybean oil for the same period of time. Malaysian Palm oil has also responded very favorably from the China announcement and in the last two trade days, has gained nearly 100 ringgit or nearly 4% of its value before the rally began.

3 Stunning: to really put just how aggressive the export pace for wheat is this year, think about this, the US is expected to export 1.1 billion bushels, with 69% of the marketing year remaining, we have already met 70% of the 1.1 billion bu commitment. The five year ave commitment of export target for this time of year has been 47%. Front Loading?: As of the most recent weekly export sales report, corn has reached 33% of the 2.25 USDA target set for the 2007/08 marketing year. Amazing is how there remains 96% of the marketing year and how the 33% committed is better than the five year average level of 20%. The question has been posed, if corn export sales start strong could they maintain the strength throughout the rest of the marketing year or are these sales front loaded to guarantee market share. Several weeks ago we performed similar research for the aggressive start to the 2007/08 wheat exports and concluded odds favor USDA to increase its export target. Could corn benefit as wheat and have its export potential raised? Let's clarify the export market is a great deal more influential for wheat than corn. Typically wheat export account for 50% of the annual demand where corn exports are typically 18-20%. Data secured by Allendale found that even though corn sales have started out a new marketing year very strong evidence suggest final marketing year sales actually were below the previous marketing year. Conversely data also suggest in years where sales began sluggish in the beginning of the marketing year, final year end sales actually have been better than the previous marketing year. With such an aggressive beginning to the present marketing year, final sales could be less than the USDA projected 2.25 billion bushels. Wheat Fundamentals: the most common asked question is "is the top in for wheat?". Allendale suggest if the market wants to make a decision based on fundamentals, we would be inclined to say the top is not likely in. If the market wants to base its decision on technicals driven by funds, its anybodies guess. You can reference the weekly export data above, the Allendale export study which suggest USDA may have to raise export potential again, you can reference the Allendale research which clearly shows in the tables above the tightness in the world supply. The seven day precipitation forecast normal rains for Western Australia but completely missing New South Wales. Even though rain is forecasted, it is viewed as non beneficial as it only likely to result in net drying. The Australian wheat crop production reduced by nearly a third in one month and announced at 15.5 million tonnes. Of the six major wheat exporters, Australia's rank fell from #2 and now rest at #4 or possibly even #5 dependent on how its harvest materializes. Fundamentally wheat is strong. Pakistan could buy 500,000 tonnes of a planned 1 million tonnes soon. Ukraine announced on Monday it will extend its export restrictions through March The market had little hope the restriction would end October 1st. Turkey has announced it will need to import 800,000 tonnes of wheat because of its drought and Iraq has launched a tender for 50,000 tonnes of hard wheat. India has announced if prices remain stable they will not sell any wheat from its domestic reserves and is expected to announced in the month of October. Thus far India has purchased 1.3 million tonnes of a planned 3-4 million tonnes for the marketing year. Bearish to wheat is news Kazakhstan could harvest 7 million tonnes more wheat than last year and make a new record crop of 21 million tonnes.

4 Crop Planting Progress: the number one winter wheat producing state of Kansas is 9% behind its five year ave planting pace vs 6% behind its normal pace just a week ago. Viewed as supportive to July 2008 new crop wheat futures Cash Marketing: see Allendale Hedge Advice page, on Tuesday 09/18/07 we sold 50% of the 2007 crop production based on firm futures, anticipating Australia's production announcement and timing suggest this is the first of the year after the harvest is complete with the second opportunity next April-May. Trade Position: the fundamental facts are world supplies are challenged by aggressive demand. We are willing buyers technically and fundamentally and have entered the long side of Dec Chicago and Monday reached our objective on our long Dec Minneapolis wheat futures...joe Victor Lean Hogs: So far the recent jump in hog slaughter is not a glitch. 420,000 head were run through plants today which is even larger than last week's 415,000 Monday total. One thing we can note is exchange rates do have an impact on live hog imports here. A falling US dollar helps US exports and hurts imports into the US. We have seen imports of live hogs jump even more than they were planned to increase this year. The latest import data suggests there was a 35,000 head increase in imports of Canadian live hogs in the week ending Sep 15 than the same week last year. Canadian pork producers will note the falling dollar makes it more expensive to ship pigs to the US. However, in this case Canadian producers are adapting by sending more weaner and feeder pigs rather than market ready numbers. We do include a chart of weekly Canadian hog imports on the Special Reports page of our internet product. Overall, for right now there is too much pork around. We do expect that to change slightly in the coming few weeks but so far it has not. On the hedge side we are hedged on 100% of marketings through December and on 50% of marketings from January and February which is just fine.

5 Live Cattle: Things are looking positive for live cattle price direction. Packers ran a very big kill for this time of year at 129,000 head and wholesale beef finished higher for both choice and select offerings. It would appear the price decline which happened in the past two weeks was simply a short term one as we expected. Cattle on Feed Friday can be considered bullish for the 2008 contracts but only neutral for the October and December. In fact new contract highs were reached for all 2008 contracts today. Cash cattle gained back $1 last week and traded $94. We should now expect the general trend to remain stronger into the next few months. Keep in mind this will not be a straight up screamer. We feel a more normal up trend (two steps up and one step back) may be the case. Even though we consider ourselves bulls here apparently the CME is even more bullish. Our upside price target of $ to $102 on the February contract has actually been reached already. For hedges we are only moderately hedged on the October and December contracts and will hold them. No 2008 contracts have been hedged. On the feeder end we missed our downside targets are $113 for the January and $ for the March. It may take some time to meet those objectives...rich Nelson September Cattle on Feed & Cold Storage Report Estimates Ave Trade Range ALLENDALE Actual On Feed September = Placements = Marketings Pork Belly stocks are estimated in million pounds while Cattle on Feed is estimated as a percentage compared to last year. USDA Cold Storage Report, to be released on Friday 2:00 PM Ave Trade Range Last Last ALLENDALE Actual Year Month Pork Belly Stocks August 31 As always, if you have questions or comments, please call to discuss or send an e mail to research@allendale-inc.com The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Commodity trading may not be suitable for recipients of this publication. This is not a solicitation of the purchase or sale of any commodities. Those acting on this information are responsible for their own actions. Any republication, or other use of this information and thoughts expressed herein without the written permission of Allendale, Inc., is strictly prohibited. Allendale Inc. c2007