Weekly fundamental grain report

Allendale Wrap-Up 3/22/2010

Corn: Traders arrived this morning with red in their eyes following Senate passage of Federal Health Care. The deflationary opinion was based on: 1.) European money flight to security continued to push the dollar higher and 2.) The U.S. Treasury debt would be the highest since WWII and not be able to sustain economic growth and hence deflationary risks existed. As the day evolved, there was a clear picture that the ONLY way the U.S. debt could ever be serviced would be to inflate all aspects of GDP (everything from input and product value to personal income) and if you hold debt flat and inflate GDP, then the U.S. economy will thrive. That being said, corn rallied into mid day on strong exports but by the close funds turned seller of 3,000 contracts by days end. Acreage estimates range between 1-4 million acres above last year. We NEED 3 million acres just to meet demand and this should provide support on any break. Weather will be the key to price direction. Any weather adversity that would delay field work and planting would be supportive. There is a gap 33¢ above the market. For now, we are expecting weather/acreage hype to provide support and for traders to lock the gap in for a target…Bill Biedermann

Soybeans: As mentioned at the end of the comments from Friday, just imagine what type of a bounce we can see in beans should trading funds step in once again. There is some debate over the topic of just where funds are at in beans. We have seen estimates ranging from long 17,000 to short 35,000. Right now the trading floor keeps a daily estimate of fund positions and they are claiming the long 17,000 position. It would make sense that if funds were going to buy grains on a lower dollar trade, they would buy the grains they hold the smallest positions in first. Rain fell over the weekend to slow South American harvest but now the forecast calls for clear weather through this week. A higher acreage report at the end of the month would set the stage for a potentially bearish bean market so we will use recent strength and fund buying to lock in early hedges. Today, November beans settled right at the high end of the range we have seen since mid February. This level of near $9.50, a good place to start with hedges, especially for those with only a few commitments this far. See our Hedge Advice page for that recommendation. Additional fund buying may still come in if the dollar continues to work lower as it did during the last half of the trading day. We stand with the recommendation that we put on a hedge before this report at the end of the month. Have an open working order in and working as these fund buying days can sometimes last as short as 15 minutes and only open orders stand a good chance of getting done. If we see funds come in and buy this market many clients will be working on hedges…Ryan Ettner

Wheat: Weekly wheat inspections measured 18.846 million bushels vs. last week’s 9.2 million bushels and pre release estimates of 11-14 million bushel. According to our “Export Demand” page, we need to average 15.279 million bushels each week for the 10 weeks remaining in the 2009-10 marketing year. Fundamentally, the trade suggests cool, wet weather is slowing the growth of the 2010 winter wheat crop and deemed as bullish. Bearish fundamentals include large old crop stocks as well as plentiful moisture. NASS suggests the release of its winter wheat crop condition report on April 5, and our research suggests good to excellent to rise 1% to a level of 64%. May 3 is typically when 60% of the spring wheat is planted and an area which needs to watched for a seasonal high. It is estimated funds bought 2,000 contracts of wheat primarily as a result of short covering…Joe Victor

Bill Biedermann is Sr. Vice President at Allendale. Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Joe Victor is Vice President 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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