Weekly fundamental grain report

Allendale Wrap-Up 3/1/2010

Corn: It is likely that next week’s USDA report will show a drop in ending stocks again. Their old crop guess was 1.719 billion bushels in February. That will push into the 1.6’s. Additionally, there is nothing but bullish news that can come from planting issues. We have a full 8 million extra acres available for planting this year. Additionally, crop budgets still point to more bottom line revenue from corn. We do have to question how much will go into corn. Though we had fantastic yields last year, farmers are getting just plain tired of all the problems associated with it since September. Keep in mind we MUST have extra acres in 2010. With our large 4 million acre increase we discussed at the Allendale conference in January, new crop ending stocks will decline slightly. If they only increase by 2 million acres we will drop ending stocks but may be able to get by. Anything less than a 2 million acre increase means we have serious supply problems. While we have laid out a bullish argument here, and it still drives our mindset into spring, we must try to be realistic. Markets cannot go up every week. Also, it is too early to start playing the bullish planting card. There have been years with late plantings and USDA actually increased their acreage estimate from March intentions to the June actual (2008). We will keep our generally steady to higher viewpoint but fully respect there is nothing wrong with a setback for a few days…Rich Nelson

Soybeans: Beans were left just to follow other markets today. With volume in the May coming in at only 58,000 and beans following the sideways pattern, there was little interest in trading beans today. It is hard for the beans to break out in either direction right now. Everyone is on the edge of their seat waiting to hear what we get for an Argentina and southern Brazilian yield. That will have to wait a little longer as recent rains in Brazil have halted harvest for the next few days. This is not rain in the concerned areas that have been too wet recently but it does delay the long awaited actual estimates. Do the recent rains cause crop damage or was there little to no effect resulting in a record yield? Does the United States find delayed planting once again leading to more acres of beans or do we get corn in on time? There are too many variables for beans to gain traction one way or another right now. Trading funds kept to the sidelines today which also subdued the activity of the day. There were early expectations for the funds to come in and buy to start the month but as we can see from the volume, they were certainly not here. With the dollar as strong as it was today, it looked unlikely that new buying was going to come in. While it is true that grains have not followed the dollar closely lately, it is also against the characteristics of funds to be buying while the dollar is on a push higher. We look for continued sideways trade especially with recent rains slowing harvest. Everyone is waiting for more information on the crop size. That is not to say a bigger rally is out of the question in beans but for now we need either fund or weather help…Ryan Ettner

Wheat: Both MGEX and CBOT May futures held the trade range and we encourage you to use these ranges for near-term trading. It is estimated that funds sold 5,000 contracts of CBOT futures with spreading starch vs. protein. It did not help the United States but did help the world cause with Iraq buying 380,000 tons of wheat. A weekly wheat inspections number of 17.676 million bushels is viewed as neutral when compared to pre-release estimates. With 13 weeks remaining in the marketing year today’s grain inspections came in 1.838 million bushels/week more than needed. The balance of the week should find CBOT trading the range and we remain long KCBT vs. the CBOT wheat. Fundamentals are supportive to the MGEX September wheat futures and ultimately we feel the chart gap $5.68-$5.6975 above may be filled…Joe Victor

Ryan Ettner is a registered broker and grain analyst at Allendale Inc. Rich Nelson is Director of Research at Allendale Inc. Joe Victor is VP of Marketing at Allendale. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com

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