MONTHLY HIGHLIGHTS:

The month of AUGUST saw the OC WHEAT futures move to new all time high's in Chicago DEC at $7.77 a bushel and DEC K.C. futures are at a record high price at $7.33 a bushel as of 8-30-08. World wheat production concerns and no major change in the size of the U.S. 2007 wheat crop are all contributing to this excellent price advance in OC futures. NC futures have lagged behind and are nearly ($1.60) lower in Chicago (DEC - JUL) and ($1.40) lower in K.C. as well. Export sales of U.S. wheat have exploded due to the record high price of EU wheat and the current lack of supply from Argentina and Australia. Canada also lowered their wheat crop size adding fuel to the fire. SOYBEAN futures also advanced the past month as the USDA crop report showed no major changes in the projected 2007 production and lowered the ending 2007/2008 carryout to below a 30 day ending supply. Weather in August was fair for soybeans but weather related problems remain a concern to the market. Some soybeans were helped by the moisture but some flood concerns and late season disease pressure may occur. The CORN market came under pressure the past month as USDA raised their production estimate to over 13 billion bushel based on a 152.8 average 2007 U.S. corn yield. The crop was rushed to maturity in many areas and with many varied yield reports (some estimates are the same field showing production up to 100 bushel different in one part vs. the other). There are just a few areas in the U.S. that did not encounter some type of weather issue this year. It started with too wet of conditions for some in the spring, to well below normal rainfall for several weeks followed by well above normal rainfall and flooding concerns - in some cases both in the spring and again now with the late season heavy rainfall in some areas. With almost everywhere in the major corn producing areas seeing some type of concern for the corn crop this is - NOT conducive to a high national average yield such as USDA is projecting. The Chinese bail out the corn market in the July crop report was followed up by a large decline in EU and FSU nation corn production in the August report which lowered ending world stocks back down. For a look at the key players in the world markets go to our USDA World Info. found under USDA Info. on the website or click on the highlighted link.

MDI's projections for the 2007/2008 marketing year are found in the PROSPECTIVE PRODUCTION report found at the link to the left or under USDA Info. on the website. We have also updated our 2007 corn, sorghum, and soybean state by state outlooks based on the USDA planted and harvested acres figures from the June 29th report and the August 10th USDA yields with our MDI adjustments. This is found by going to to the Grain Estimates sub menu under USDA Info. and clicking on the pull down year box below the crop heading and moving the cursor up to the top of the selection area and clicking on the word MDI.

GOVERNMENT and OTHER NEWS:

USDA's SEPTEMBER 12th U.S. crop report MAY SHOW: WHEAT: 2007/2008 U.S. acreage of 60.5 million, harvested acres at 86.45% or 52.1 million harvested acres, with a U.S. yield of 40.7 bushel (up .1) per acre for a 2007 U.S. wheat crop of 2.120 billion bushel - up 6 million from last month. Exports could increase 25 million to 1.100 billion bushel, domestic seed use of 81 million, feed use should stay at 180 million, and food use at 930 million. This when combined with imports of 100 million and ending 06/07 wheat stocks of 456 million bushel, would leave ending 2007/2008 U.S. carryout at 385 million bushel or a 61.4 day ending supply - 38% below the fifteen year average of 620 million. World wheat production for 2007/2008 could fall 1.4 MMT to 609 MMT. on a smaller EU crop, and world wheat demand might grow 1.5 to 622 MMT, beginning stocks should be around 125 MMT which would leave ending world 2007/2008 world stocks down 2.8 to 112 MMT or a 65.8 day ending supply - a record low level. This would be a FRIENDLY wheat report - with the U.S. export sales figure the key item to watch. CORN/SORGHUM: USDA could eventually lower their 2007 U.S. corn yield to around the 150.3 bushel per acre, and use a 91.92% harvested % for 85.4 million acres of the 92.888 million acres planted in 2007 for a 12.845 billion crop. Their 07/08 domestic feed use could fall 50 million to 5.700 billion, ethanol use should stay at 3.400 billion with total domestic use of 10.540 billion. Exports should hold at 2.150 billion due to less wheat feed available in the world and lower U.S. corn prices. Combining these with imports of 13 million and ending 06/07 stocks of 1.137 billion bushel it leaves the U.S. carryout at 1.355 billion bushel (down 205) - a level 6.35% below the fifteen year average of 1.447 billion and a 39 day ending supply. World 07/08 corn production could fall another 5.5 MMT (if the U.S. crop size is lowered) to 770 MMT with the U.S. at 326.28 MMT (down 5.3), and China up 1 to 149 MMT. World corn demand should hold in the 770 MMT area, and with beginning stocks of 100 MMT, it leaves the 2007/2008 carryout down 6.2 MMT to 96 MMT or a 45.5 day ending supply. This would be a FRIENDLY corn report with the U.S. yield estimate the key. SOYBEANS: USDA could lower its 2007/2008 U.S production to around 2.600 billion bushel based on 64.5 million planted acres, a harvested percentage of 98.15% or 63.3 million planted acres, and a 2007 U.S. yield of 41.1 bushel per acre. Their export demand could drop by 20 million due to the higher prices and good available supply in South America to 1.000 billion bushel, crush use should stay at 1.800 with total domestic use of 1.963 billion. Add in 4 million of imports and with beginning stocks of 575 million bushel, it leaves the ending U.S. stocks for 2007/2008 at 215 million bushel or just a 26.5 day ending supply. World production for 2007/2008 may fall .3 MMT (lower U.S. production) to 221.3 MMT and with d world use up .8 to 234 MMT, and beginning stocks of 64.5 MMT, it leaves ending world stocks of 51.8 MMT or a still above average 80.8 day ending supply (the average since 1990 has been 70 days of ending supply). The U.S. 2007 crop should be around 70.75 MMT, Brazil at 61 MMT, Argentina at 47 MMT, and the Chinese crop at 15.2 MMT.. This would be a SLIGHTLY FRIENDLY soybeans report due to the drop in the ending world and U.S. carryouts.

USDA's AUGUST 10th U.S. crop report SHOWED: WHEAT: 2007/2008 U.S. acreage of 60.5 million, harvested acres at 86.11% (down 400,000 acre from last month due to reduced KS acres) for 52.1 million harvested acres, with a U.S. yield of 40.6 bushel per acre (down .1) for a 2007 U.S. wheat crop of 2.114 billion bushel - down 24 million from last month. Exports increased 25 million to 1.075 billion bushel, domestic seed use was left at 81 million, feed fell more than we expected as it was down 35 million to 180 million, and food use stayed at 930 million. This when combined with imports of 100 million and ending 06/07 wheat stocks of 456 million bushel, left ending 2007/2008 U.S. carryout at 404 million bushel or a 65.1 day ending supply - nearly 35% below the fifteen year average of 620 million. World wheat production for 2007/2008 fell 1.87 MMT to 610.4 MMT. on smaller EU and U.S. crops, and world wheat demand grew by .64 MMT to 620.51 MMT. Beginning stocks were up .75 to 124.9 MMT which left ending world 2007/2008 world stocks down 1.77 to 114.78 MMT or a 67.6 day ending supply - a record low level. This was a SLIGHTLY FRIENDLY wheat report. CORN/SORGHUM: USDA raised their 2007 U.S. corn yield by 3.7 bushel per acre to 152.8 bushel per acre, and used a 91.92% harvested % for 85.4 million acres of the 92.888 million acres planted in 2007 for a 13.054 billion corn crop. Their 07/08 domestic feed use rose 50 million to 5.750 billion (less wheat feeding), ethanol use stayed at 3.400 billion with total domestic use of 10.540 billion. Exports rose a large 150 to 2.150 billion due to the less wheat feed available in the world and lower U.S. corn prices. Combining these with imports of 15 million and unchanged ending 06/07 stocks of 1.137 billion bushel left the U.S. carryout up slightly to 1.516 billion bushel - a level 4.77% above the fifteen year average of 1.447 billion and a 43.6 day ending supply. World 07/08 corn production actually fell a surprising 5.6 MMT to 771.5 MMT with the U.S. at 331.58 MMT (up 5.43), China at 148 MMT, but the EU-27 down 6.8 to 48.43 and the FSU-12 down 1.3 to 12.18 MMT.. World corn demand held at 769.48 MMT, and with beginning stocks of 100.2 MMT (down .75) , it left the 2007/2008 carryout down 6.13 MMT to 102.23 MMT or a 48.5 day ending supply. This was a mostly NEUTRAL corn report with the U.S. production increase offsetting the drop in ending world stocks. SOYBEANS: USDA left its 2007/2008 U.S production the same at 2.625 billion bushel based on 64.1 million planted acres, a harvested percentage of 98.75% or 63.3 million planted acres, and an unchanged 2007 U.S. yield of 41.5 bushel per acre. Their export demand held at 1.020 billion bushel, crush use stayed at 1.800 with total domestic use of 1.965 billion. Add in 4 million of imports and with beginning stocks of 575 million (down 25) bushel, it left the ending U.S. stocks for 2007/2008 at 220 million bushel or a - LOW - 26.9 day ending supply. World production for 2007/2008 fell .43 MMT to 221.62 MMT and with world use down .96 to 233.21 MMT, beginning stocks of 64.52 MMT (up .35), it left ending world stocks of 51.63 MMT (virtually unchanged) or a still above average 80.9 day ending supply (the average since 1990 ha been 70 days of ending supply). The U.S. 2007 crop was left at 71.45 MMT, Brazil at 61 MMT, Argentina at 47 MMT, and the Chinese crop dropped .4 to 15.2 MMT.. This was a SLIGHTLY FRIENDLY soybeans report due to the drop in ending U.S. carryout to less than 30 days of supply which is partly offset by higher than average ending world stocks.

In August USDA raised their 2006/2007 U.S. soybean crush estimate up by 5 million and exports by 20 million for a 25 million drop in ending 06/07 U.S. stocks to 575 million bushel. They left their ending 06/07 U.S. corn carryout the same at 1.137 billion bushel but could drop it next month due to the slow export shipments pace. Their 2006/2007 WORLD figures did not have many major changes and should be considered neutral for the market.

The new farm bill has passed the House and is now waiting on the Senate to act. President Bush (in typical fashion) is not satisfied with the bill due to it not dropping the Adjusted Gross Income (AGI) level low enough - the House version is using a three year average of $1,000,000 as a cap, the Bush administration and Ag Secretary Johanns also object to the addition of a tax on foreign corporations to offset some added nutrition (food stamp) spending. Many of the existing provisions of the farm bill are included in the House version. It is now in the hands of the Senate and then a final compromise bill will need to be developed - look for more details in the September newsletter. The Senate plans to make some major changes to the House bill especially in the area of crop insurance, etc..

Congress passed and the President signed $3 billion of disaster aid in funding tied to a war supplemental spending bill in May. USDA is now saying that livestock producers can start enrolling in the program around September 10th with grain producers having to wait until around October 15th for signup. The grain payments will be like previous disaster aid calculations except the amount of aid will be down from 65% to 42%. Producers must have had crop insurance to qualify for payments and the target price used will be the average of prices for each commodity from 2001 to 2005 (why 2006 is not included is a mystery- probably because prices were higher) with the high and low year thrown out. MDI is still looking for the target prices but has entered $3.25 to $3.40 on wheat, $2.10 to $2.20 on corn, $5.30 to $5.50 on soybeans, $9.0 to $9.5 per CWT on sunflowers and $2.00 to $2.10 a bushel on grain sorghum into our review. Producers must choose either 2005 or 2006 on each unit and for all crops in that unit but can switch years from unit to unit. It is estimated it will take a couple of months to finalize the application process and for producers to begin applying. Livestock producers can apply for indemnity payments of at least 26% of the market value of livestock deaths based on the price the day before the date of death of the livestock and the county they are located in must have been declared a natural disaster county (or be a contiguous county to one declared a disaster). MDI has updated its DISASTER REVIEW found under USDA Info.. This will give producers an estimate of what payment they MIGHT expect but is not guaranteed as the key is the target price that USDA sets which is not known yet. To fill this out you will need your crop insurance APH information for 2005 and 2006, your crop insurance premiums and settlement dollars received (if any), your actual acres (matching the acres reported to the crop insurance company) and your actual production (or assigned yield as a part of a crop insurance settlement). Remember this is an ESTIMATE only.

WHEAT INFORMATION AND ANALYSIS:

K.C. WHEAT: Spot OC futures in our similar years historically averaged 98.72% of the starting price the next 30 days so look for DEC 07 K.C. futures to average around $6.88 this month. DEC K.C. futures were $6.87 a bushel as of 8-27-07. The market tends to trade technicals or trends so we are going to review some historical FACTS to see what we might expect going forward. DEC K.C. is our OC futures for making sales of the 2007 crop that remains unsold or priced. The average DEC K.C. futures price since 1970 as of August 27th was $3.59 a bushel and in our similar years it was $4.59 a bushel so the current price of $6.87 is MUCH HIGHER. Secondly, the average futures move DOWN from August 27th to November 22nd from 1970 to 2006 was ($.19) and in our similar years was ($.50) for a $6.40 to $6.70 DEC K.C. futures target low this year. Next we looked at the average move UP which was up by $.28 from the starting price since 1970 and in our similar years it was up by $.39 which is a futures target high on DEC K.C. in the $7.15 to $7.25 area. We also looked at the average November 22nd ending futures price and found it to be about $.04 above the starting price since 1970 and ($.02) lower in our similar years for a possible ending price of $6.80 to $6.90 on November 22nd this year.

WHEAT SIMILAR and ALL YEARS REVIEW: The HIGHEST price DEC K.C. futures hit during the 8-27 to 11-22 period since 1970 was $5.46 (on 10-16-2006) with a similar years $4.98 average high and the LOWEST price reached in our similar years was $3.45 with and average low price of $4.09. The average futures price in our similar years was $4.57 a bushel on DEC K.C. futures during this timeframe. Our similar years had an average U.S. carryout of 431 million bushel with an average cash price of $4.00 a bushel - an estimated average U.S. cash wheat basis of a ($.45) equals an average futures price of around $4.45 or WELL below the closing prices on 8-27-2007. The ending U.S. stocks to use in our similar years were at a 77 day supply vs. the August USDA figure of 65.1 days for 07/08. The average export sales in our similar years were 1.120 billion vs. USDA's 1.075 million figure with domestic use of 929 million vs. USDA's 1.191 billion figure for 07/08. The average export sales figure since 1970 has been 1.144 billion bushel a year, with ending stocks of 849 million or a 142 day average ending stocks figure with an average U.S. cash price of $3.13 a bushel or an average futures price of $3.58 using the ($.45) cash basis figure. Ending world stocks averaged 106 days of ending supply since 1970 vs. the current 67.6 day figure at the end of 07/08. DEC futures made a high in September in 13 of the last 37 years, and they made a low the next month in 24 of the last 37 years - nearly 65% odds of a low the next month and only 35% of a high being set.

QUICK CHECK REVIEWS - based on price levels hit 50% of the time or movement up 40% of the time. You can use the upper ranges of these as a guide for getting the biggest share of the crop price protected or cash sold and the lower range for starting pricing. You should combine the two in order to get a clear picture of price potential.

OC - K.C. DEC WHEAT: futures normally move up by $.35 to $.72 up from now to the end of November which would be to the $7.33 to $7.70 area. A futures price of $3.80 to $4.05 was hit at least one day, 50% of the time in the last 3 to 35 years. Use $6.95 on DEC K.C. for 100% pricing of the 2007 crop with at least the use of put options costing around ($.14) to lock in a floor.

NC- K.C. SEP WHEAT: futures normally move around $.48 to $.84 up by the end of August which would be to a price around $6.35 to $6.75 based on the last 10 to 35 years and a 40% move odds review. They also hit a $3.96 to $5.20 price at least one time - based on the last 3 to 35 years and a 50% odds review. Target SEP futures in the $6.00 area for 40% pricing and $6.50 for 60% pricing of your 2008 crop using options on anything over 40%.

SEP 08 K.C. wheat futures closed at $5.78 on 8-27-2007 vs. an average futures price on that date since 1970 of $3.53 a bushel and in our similar years the average was $4.36 a bushel so the current price is MUCH HIGHER. Secondly, the average futures move DOWN from August 27th to August 22nd from 1970 to 2006 was ($.46) and in our similar years it was ($.83) for a $4.95 to $5.30 SEP K.C. target low this year. Next we looked at the average move UP which was up around $.66 from the starting price since 1970 and in our similar years it was up by $.78 which is a futures target high in the $6.45 to $6.60 area. Move 2008 NC pricing to 40% with SEP futures at $6.00 and add option protection up to 60% coverage when SEP K.C. futures hit $6.50.

USDA REPORTS: In August USDA lowered their 2007/2008 wheat yield by .1 to 40.6 bushel on 52.1 million harvested acres of the 60.5 million planted acres for a 2007 crop of 2.114 billion. Beginning stocks of 456 million bushel when combined with 07/08 domestic food use of 930 million, seed use of 81 million, feed use of 180 million (down 35), imports of 100 million, and 1.075 billion of exports (up 25) left ending U.S. wheat stocks for 2007/2008 at 404 million bushel (down 14) or 35% below the 620 million fifteen year average. USDA's cash price was moved up $.30 to $5.40.

WORLD INFORMATION: The August 10th crop report showed 2007/2008 world production falling by 1.87 MMT to a total world production figure of 610.4 MMT or 22.428 billion bushel. USDA's world 07/08 demand rose .64 MMT to 620.51 MMT or 22.800 billion bushel and ending stocks fell 1.77 MMT to 114.78 MMT or 4.218 billion bushel and just a 67.6 day ending supply - this is the LOWEST figure in 30 years. USDA left the Pakistan crop at 23.0 MMT, Australia's at 23.0 MMT, Canada was down 1 to 21.5, the U.S. at 57.53 (down .66), China at 105, India up 1.19 to 74.89 the EU-27 crop at 124.93 (down 1.7), and the FSU-12 crop actually rose 1.25 MMT to 85.54 MMT.. The August 23rd IGC report lowered 07/08 world wheat production by 7 MMT to 607 MMT, and demand fell 3 to 614 MMT and ending stocks fell just 1 MMT to 111 MMT or a 66 day ending supply - record LOW!

FUNDS: held a net long K.C. wheat futures position on 8/21/2007 with 59,180 contracts net long and and 12,040 contracts short. Funds held a net long Chicago wheat futures position with 104,347 contracts long and held short futures positions of 78,385. In the MN futures, they held long positions of 13,622 contracts and were holding short positions of just 374 contracts. The CFTC futures/options positions of 8-21-2007 showed: K.C. Traditional funds an increased long 51,059 contracts vs. an increased 11,745 short positions and Index funds holding a decreased 31,976 long contracts vs. just 103 short positions in the K.C. market. In Chicago wheat the Traditional funds held a decreased 73,314 long positions and a decreased 71,526 short positions while Index funds held a decreased 186,622 long positions and a decreased 6,611 short positions. In MN the traditional funds held an increased 14,100 long positions and just 365 short positions. This is a reduced 1.334 billion net long position by the funds in all the futures and options - down 2 million bushel from a month ago. Remember that Index Funds are ones that take long positions in the market, then roll these forward and seldom sell or short the market. Their sales are usually made when investors want their money back out.

Some BULL CASE factors to consider are:

1. The U.S. could see slightly lower yields on some of the spring wheat due to the late season hot weather.
2. The world ending days of supply is projected to drop to a record low level which should help wheat prices firm.
3. The world wheat production figures could drop in future reports as many areas continue to see weather problems with the focus now on the dry weather in Australia, Argentina and the Ukraine.

Some BEAR CASE factors to consider are:

1. Australia had enough moisture for its wheat crop to be projected at 20 to 22 MMT and they will be a major exporter once their harvest begins.
2. Many spring wheat reports are of good yields and this may cause a slightly higher spring wheat crop estimate.
3. Higher prices in the world will encourage added production next year - BUT - not likely to affect 2007 prices until just before the Australian harvest begins.

CORN AND SORGHUM INFORMATION AND ANALYSIS:

CORN spot futures in our similar years averaged 97.7% of the starting price during the next 30 days or a price around $3.45 on DEC corn futures which closed 8-27-07 at $3.53 a bushel. DEC corn futures at $3.53 were $1.05 above the average price on that date since 1970 and $..43 above our similar years price of $3.10. The average low price since 1970 and in our similar years was a drop of ($.33) and the drop was a ($.19) from the August 27th price since 1970 so if history repeats itself - look for a low price of $3.20 to $3.35 on DEC corn futures by 11-22. Next we looked at the potential for price improvement during the period ending November 22nd. The average move up since 1970 and in our similar years it was $.18 up which would mean an average target high on DEC corn of $3.70 this year.

CORN SIMILAR and ALL YEARS REVIEW: The HIGHEST price DEC corn futures hit during the 8-27 to 11-22 period in our similar years was $3.95 (10-3-1974) with the LOWEST price reached in our similar years of $2.56 and the average price in our similar years of $3.01 and all years since 1970 being $2.45 a bushel on DEC corn futures. Our similar years have an average U.S. carryout of 838 million bushel with an average cash price of $3.02 a bushel - an estimated average U.S. cash corn basis of a ($.28) equals an average futures price of around $3.30 or below the closing average on 8-27-2007. The ending U.S. stocks to use shows a 41 day supply in our similar years vs. the August USDA figure of 43.6 days for 07/08. The average export sales in our similar years were 1.906 billion vs. USDA's 2.150 billion figure with domestic use of 5.535 billion vs. USDA's 10.540 billion figure. The average export sales figure since 1970 has been 1.715 billion bushel a year, with ending stocks of 1.641 billion or a 77 day average ending stocks figure with an average U.S. cash price of $2.28 a bushel or an average futures price of $2.56 using the ($.28) cash basis figure. Ending world stocks have averaged around 92 days of ending stocks since 1970 vs. a current figure of 48.5 days at the end of 2007/2008. DEC futures made a high in September in 20 of the last 37 years, and they made a low the next month in 15 of the last 37 years. Move 2007 NC pricing to 40% with DEC corn futures at $3.40 and add option protection up to 60% coverage with $3.70 DEC futures.

QUICK CHECK REVIEWS - DEC CORN: futures normally move up around $.07 to $.24 up by the end of November which would be to a price around $3.52 to $3.69 - 40% of the time. They also hit a $2.43 to $2.48 price at least one time - based on the last 3 to 35 years and a 50% odds review. We are targeting DEC 07 corn futures at $3.40 for 40% pricing and $3.70 for 70% pricing on the 2007 corn crop.

SORGHUM INFORMATION: In August USDA increased their 2007/2008 grain sorghum yield to 70.9 (up 6.7) bushel per acre, harvested acres at 6.7 million of the 7.8 million planted for a 2007 crop size of 475 million bushel (up 45). Beginning 2007/2008 sorghum stocks of 38 million bushel combined with an exports of 200 million (up 40), and domestic use of 245 million (up 90 from 06/07), left ending stocks at 68 million bushel (up 5) and a 56 day ending supply. SORGHUM donations stood at 14.76 million as of the end of June and with sales are below USDA's 06/07 estimate of 150. Shipments to 8/21/2007 totaled 144 million vs. 150 million estimated by USDA for 2006/2007.

USDA REPORTS: The August USDA report showed beginning U.S. 2007/2008 corn stocks of 1.137 billion bushel, harvested acres of 85.4 million out of 92.9 million planted, an increased yield of 152.8 bushel (UP 2.5) for a crop of 13.054 billion bushel. Their 07/08 feed use rose 50 to 5.750 billion, ethanol use was left at 3.400 billion for total domestic use of 10.540 billion. Imports were placed at 15 million bushel and 07/08 exports were raised 150 million to 2.150 billion to cause ending 2007/2008 U.S. stocks to rise 14 million to 1.516 billion or to 4.75% above the fifteen year average ending stocks of 1.447 billion bushel and 43.6 day ending supply vs. a fifteen year average carryout of 57 days ending supply. USDA left their average price at $3.10 a bushel.

WORLD INFORMATION: In August, USDA showed 2007/2008 world corn production falling a surprising 5.6 MMT (even with a 5.4 increase in the U.S. crop) to 771.5 MMT or 30.372 billion bushel with the U.S. at 321.58 MMT (up 5.43), China at 148, Brazil at 50, Argentina at 24, South Africa at 10.5, Canada at 11.2, Mexico at 23.2, and the EU-27 fell 6.8 MMT to 48.43 MMT and the FSU nations fell 1.3 MMT to 12.18 MMT. World corn demand fell by .22 MMT to 769.48 MMT or 30.292 billion bushel and ending stocks were down by 6.13 MMT to 102.23 MMT or 4.025 billion or a 48.5 day ending supply. USDA's coarse grain figures for 07/08 showed world production at 1,059.83 MMT (down 5.8), demand was placed at 1058.85 MMT (down .36), and ending stocks were down 6.43 MMT to 130.86 MMT for a 45.1 day ending supply. The August IGC figures for 2007/2008 on maize production was 3 MMT to 755 MMT and maize demand fell 1 to 762 MMT with ending stocks 4 to 96 MMT or a 46 day supply. The IGC ending TOTAL GRAINS carryout is at a record low 52.9 day ending supply.

FUNDS: Non-commercials on 8/21/2007 held an decreased long corn futures positions of 309,245 contacts, and held short futures positions of a decreased 126,208 contracts. The breakdown by the CFTC in futures and options showed Noncommercial (traditional funds) holding decreased long positions of 193,933 vs. decreased short positions of 82,257. Index Funds held long positions of a reduced 363,974 contracts and short positions of a reduced 9,946. This makes the combined futures and options of the funds a net long position of an increased 2.329 billion bushel - up by 50 million (2.2% up) from a month ago.

Some BULL CASE factors to consider are:

1. The ending 2006/2007 days of supply of world corn and coarse grains are at low levels and the U.S. crop should end up smaller than the last USDA estimate. Many areas of the U.S. saw either planting problems (too wet), initial dry weather problems (causing some reports of smaller ears and less kernel rows), or suffered from dry weather later in the season. All of these should keep the average yield estimate below 152 bushel per acre.
2. Demand for U.S. grain for ethanol use remains strong and the recent corn price / gas price relationship should keep this expansion on track and may cause even more demand in 2008.
3. The drop in world wheat production should cause added corn export demand with the U.S. the likely source for most of this demand which will help offset part of the higher 2007 production.

1. The USDA acreage figure of 92.888 million corn acres means a higher harvested than normal percentage and with any yield over 154 bushel per acre could cause carryout to rise above 2.0 billion bushel on 9-1-2008 which would mean sub $3.00 DEC 07 corn futures.
2. Sorghum crop condition ratings are very good and this crop should provide added competition to corn this year.
3. South American corn production is projected to rise significantly which will provide added U.S. export competition.

SOYBEAN AND SUNFLOWER INFORMATION AND ANALYSIS:

SPOT NOV soybean futures in our similar years averaged around 98.92% of the starting price during the next 30 days which would be around $8.64 a bushel on NOV beans which closed at $8.73 on 8-27-07. The futures price on NOV soybeans on 8-27-2007 of $8.73 was $2.73 higher than the average price since 1970 and $2.01 higher than in our similar years on that date. The average move down from 8-27 to 10-22 in our similar years was ($.74) and since 1970 was a ($.37) or to a target futures low around $8.00 to $8.35 on NOV soybeans. The average move up since 1970 has been $.38 and in our similar years it was around $.20. This makes the average high move on NOV soybeans this year to the $8.90 to $9.10 area. NOV futures made a high during September in 27 of the last 37 years and the low for this period was next month 15 of the last 37 years.

SOYBEANS SIMILAR and ALL YEARS REVIEW: The HIGHEST price MAR soybean futures hit during the 8-27 to 2-22 period in our similar years was $8.27 (9-12-1996) and the all time high for MAR futures during this time of year was $9.68 on 10-4-1974. The LOWEST price reached in our similar years was $4.55 with the average price in our similar years being $6.41 a bushel and in all years since 1970 it was a $6.11 average on MAR soybean futures during this timeframe. Our similar years had an average U.S. carryout of 237 million bushel with an average cash price of $6.45 a bushel - an estimated average U.S. cash soybean basis of a ($.65) equals an average futures price of around $7.10 or WELL below the price on 8-27-2007. The ending U.S. stocks to use in our similar years showed a 44 day supply vs. the August USDA 07/08 figure of 26.9 days. The average export sales in our similar years were 730 million vs. USDA's 1.020 billion figure with domestic use of 1.240 billion vs. USDA's 1.965 billion figure. The average export sales figure since 1970 has been 748 million bushel a year, with ending stocks of 251 million or a 45 day average ending stocks figure with an average U.S. cash price of $5.69 a bushel or an average futures price of $6.35 using the ($.65) cash basis figure. Ending world stocks have averaged around 70 days since 1970 vs. a current figure of 105.4 days for 06/07 and a 80.9 day figure for the end of 07/08 - a still not bullish supply situation in the world. MAR futures made a high during September in 19 of the last 37 years and the low for this period was next month in just 6 of the last 37 years.

QUICK CHECK REVIEWS - OC MAR 08 SOYBEANS: futures normally move around $.18 to $2.08 up by the end of February which would be to a price around $9.16 to $11.06 and they hit a $6.32 to $6.68 price at least one time - based on a review of the last 3 to 35 years and a 50% odds review. Use the $9.20 area on MAR for 60% pricing on OC and $9.50 for 80%.

NC - NOV SOYBEANS: futures moved up by $.17 to $.89 up by the end of October which would be to the $8.89 to $9.61 area and a futures price of $6.14 to $6.37 was hit at least one day, 50% of the time in the last 3 to 35 years. We are looking at the $8.50 area for 60% pricing and $8.80 for 70% pricing of the 2007 crop.

USDA REPORTS: In August USDA showed beginning U.S. 2007/2008 stocks of 575 million bushel (down 25), 2007 U.S. harvested acres were 63.3 million out of 64.1 planted and with a yield of 41.5 bushel to show a 2007/2008 U.S. crop of 2.625 billion bushel. They left 2007/2008 imports at 4 million, 2007/2008 U.S. exports were left at 1.020 billion, and domestic use was placed at 1.965 billion for an ending U.S. 2007/2008 carryout of 220 million (down 25) or just a 26.9 day ending supply. This is 84% of the fifteen year average ending stocks figure of 268 million bushel when ending days of supply averaged 36 days and the 36 year average is 45 days ending supply. USDA left the 2007/2008 average U.S. cash price at $7.75.

WORLD INFORMATION: The 2007/2008 USDA figures in August showed 221.62 MMT of world production (down .43) or 8.143 billion bushel. World use was placed .96 MMT lower at 233.21 MMT or 8.569 billion bushel, and ending world stocks are shown falling .24 MMT to 51.63 MMT or 1.897 billion bushel or a still above average 80.9 day ending supply. The U.S. crop was placed at 71.45 MMT of production, China's crop at 15.2 (down .4), Brazil at 61, and Argentina at 47 MMT.. The sixteen year average ending world stocks figure is 61 days and the average since 1970 is 70 days.

FUNDS: On 8/21/2007 the CFTC showed funds with a reduced long futures position of 139,380 contracts long and short positions of an a decreased 43,261 contracts. In futures and options, Noncommercial Funds (traditional funds) were shown with a decreased 95,046 long futures/options contracts and a small decrease of short contracts to 26,276. The Index Funds showed long futures and options positions of a decreased 159,716 and short positions of an increased 8,772 contracts. Remember that Index Funds take long term positions in the market and usually only sell to roll their positions forward only if investors request a withdrawal from the fund. The total net long positions by the funds was a fairly large decrease of 141 million (down 11.4%) to 1,099 million bushel.

BULL CASE factors to consider are:

1. The projected drop in U.S. soybean 07/08 carryout to just a 26.9 day supply has the markets attention. This makes any late season weather or rust event will be that much more bullish this year.
2. The USDA projection of a drop in the U.S. carryout to 220 million bushel by 9-1-2008 is very supportive to prices.
3. The U.S. 2007 sunflower acres are projected to be down again this year which should help support both OC and NC prices.

BEAR CASE factors to consider are:

1. Fundamentally this market has large carryout figures in both the U.S. and the world at the end of 06/07 and the reduced U.S. acres and $8.85 NOV 07 soybean futures should stimulate more South American acres for next year.
2. The commodity funds still hold a net long positions of over 1.0 billion bushel in futures and options. They could liquidate these positions on any negative news which would press futures prices lower.
3. We look for USDA to add more double crop soybean acres and more acres behind failed wheat in future reports. High prices should have encouraged these activities to occur.

SUNFLOWERS: producers should make NC sales of 50% at a price $8.00 per CWT above your local loan rate. The 2007 U.S. sunseed acres are shown at 1,864,000 vs. 2006 when 1,950,000 acres were planted or DOWN by 4.4% which should help prices remain firm all summer long. Check out the 2007 contracts now available with ADM in Goodland reaching the $.176 a lb. recently and - with an Act of God clause.

LIVESTOCK ANALYSIS: Feed purchases for 80% of the fourth quarter of 2007 needs should be covered if DEC futures break to the $3.20 area or else just buy as needed. Forward coverage for 50% of first quarter 2008 needs could be made based on MAR 2008 futures when they drop into the $3.35 area. First half 2008 coverage could move to 40% with MAR 08 futures in the $3.45 area.

USDA REPORTED: January 1 Inventory of cattle and calves vs. shown at 97.0 million head - up slightly from 96.7 million on January 1, 2006. The USDA February 2nd U.S. cattle inventory report showed all cows and heifers at 42.0 million head or 1/4 of 1% lower than the 42.1 million head a year ago. Beef cows as of January 1, 2007 were 32.9 million head or slightly lower than a year ago and milk cows were up 1% at 9.13 million head. The August 17th Cattle on Feed report showed 10.3 million head of cattle on feed or 5% below 2006 but 2% above 2005. Other disappearance in July was up 5% from 2006 but unchanged from 2005. The August 10th Meats supply and use report showed beef supply for 2007 of a projected 30,054 million pounds with 1,364 million of exports, 3,270 of imports, and 28,140 of consumption for a per capita consumption of 65.1 lbs. vs. 65.7 lbs. in 2006. The supply figure is 1.005% of the previous year. Production of U.S. beef is shown at 26,154 vs. 26,258 a year ago or at 99.6%.

The Quarterly Hog and Pigs report of June 29th showed all hogs and pigs on June 1 of 62.8 million head or 2% above a year ago and 2% above March 1, 2007 - so much for high priced grains causing liquidation of hogs. The hog breeding herd number of 6.12 million head was up 1% from a year ago and 2% above the March 1st level.

The August 21st CFTC Commitment of Traders report showed funds net long a decreased net long 10,735 live cattle contracts - down from 22,782 contracts net long a month ago. The Noncommercial (traditional) funds were net short Live Cattle futures and options by a 30,479 positions to 31,558 short position's. Index Funds held a decreased 113,784 long live cattle futures and options and were short just 724 total contracts. Feeder Cattle futures saw the funds holding a net long futures position of an increased 1,047 contracts to 7,450 futures contracts and Noncommercial funds held futures and options long positions of 7,932 contracts long and short positions of a decreased 3,203 contracts. Index funds are shown holding long futures and options of 8,237 contracts (down 100) and 5 short contracts.

QUICK CHECK SHOWS 40% OF THE TIME that FEBRUARY Live Cattle moved up in price $3.82 to $11.05 from August 29th to the end of January based on a 3 to 35 year review. This means those looking to sell finished cattle by then should use FEB 08 Live cattle futures in the $104.50 to $111.70 area for pricing. November Feeder cattle futures have 40% odds of moving up by $2.95 to $7.33 based on a 3 to 35 year review so look for pricing in the $122 to $126 area. We ran our Livestock review on feeder steers put on feed at 500 #, costing $127 and fed to 850 # @ a cost of gain of $.58 a #, and the cash break-even was $103.38, and with a cash basis of a ($12.0) the futures break-even was $115.38 on March 2008 feeder cattle and a $30 per head profit meant that futures would need to go to $118.91 - the 30 year move odds show 33.3% odds that this large of move could occur. August 2008 Live Cattle futures had 50% odds of moving up enough to reach a $30.00 profit on these cattle if they are taken from 850# to 1350# using a cost of gain of $.70 a lb. for a break-even finished of $95.39 and a ($.49) basis equals a $95.88 futures target for a break-even and a $30 profit could be reached at $98.19 futures and these futures were $94.50 on 8-29-07. Heifers weighing 475 lbs and costing $120 had 83.3% odds of locking in a $30 per head profit using June 2008 Live cattle futures at $97.36 (they were already at $95.87 on 8-29) using the same cost of gain figures as on the 500 # steers.

U.S. and WORLD WEATHER INFORMATION:

THE U.S. Palmer Drought Index shows all of TX, most of OK, most of the eastern 2/3 of NE, eastern IA, southern WI, eastern SD, the northern fourth of IL, and most of KS (not the NW area) with very moist to extremely moist conditions but most of the rest of the U.S. with almost all of the western U.S. in drought conditions along with much of the southeastern U.S. up into the southern half of IL, southern OH, most of MN and northern WI and southern IN are dry. The Crop Moisture Index shows all of IA, northern IL, southern MN, southern WI, northern IN, northern OH, central areas of TX and southwestern OK with above normal topsoil levels BUT most other areas including western areas of the U.S. and northern MN, western ND, and southeastern MO show dry topsoil levels as of August 25, 2007. Above normal temperatures are forecast for September for the western areas of the U.S. starting from northwestern CO and northwestern UT north and west o the eastern edges of OR and WA including all of NV. Above normal moisture in September is forecast for most of KS, southeastern NE, all of OK, and northeastern TX, western half of MO, and most of AR. MARKET IMPLICATIONS of these forecasts are: The market may maintain some concerns about soybean diseases but harvest should proceed at a fairly good pace in the next month.

INTERNATIONAL WEATHER (according to DTN) or OsterDowJones: The dry weather in parts of the Ukraine and Russia continues and could be a problem for wheat planting conditions and is adding stress to fall crops. Australia needs some added rainfall as its crop is growing slowly. Argentine weather problems (dry areas and lack of rainfall in some areas) could cause a smaller wheat crop from this export supplier. Russia has been making many wheat sales to places including Egypt this past week but the U.S. should be competitive on several other tenders. China is seeing some dry weather during soybean crop filling which may be reducing their yields. Dry weather concerns for Australia, Argentina and the Ukraine are part of the driving force behind the bull wheat market.

EXPORT AND FOREIGN INFORMATION:

U.S. WHEAT-07/08

1,075 mb. - up 25

 610.6 mb.

50 mb.

271 mb.

80 mb.(30 flour)

160 & 139 mb.

CORN -06/07-

2,100 mb.

2,219 mb.

-0- mb.

2,076 mb.

24 mb. 

SOYBEANS 

1,100 mb.- up 10

1,143 mb.

-0- mb.

1,097 mb. 

3 mb.

Export sales of U.S. wheat remains very strong and it looks like USDA could raise their export figure by another 25 million bushel. Corn shipments for 2006/2007 may exceed the 2.100 billion figure if over 24 million bushel is shipped the last week of August - note that 71 million bushel of corn has been shipped but not inspected according to the export sales report. The spot month dollar index rose slightly to sit at a price of $80.87 this month vs. a price of $80.66 a month ago and is keeping U.S. grains competitive in the world markets.

In August USDA showed ending 2007/2008 U.S. stocks of the major commodities with a year to year increase in days of supply on corn going from 36.5 days to 43.6 days, soybeans project to drop from 68.5 days down to 26.9 days, and wheat was down a large 16.2 days to an ending supply of 65.1 days from 81.3 at the end of 2006/2007. Ending world stocks are projected to fall in 07/08 on corn from 50.5 days to 48.5 days of supply, soybeans were projected to fall 24.5 days to 80.9 days from 105.4, and wheat goes from 73.9 days supply down to a 30 year low of just 67.6 days ending supply at the end of 2007/2008.

OTHER MARKET INFORMATION AND TECHNICALS:

Note that a Relative Strength Index (RSI) over 70 may be a sign of a topping market and a rating under 30 may be the sign of a bottoming market. We feel the 30 day RSI rating should be used for long term trends and the 9 day rating may be considered when making short term decisions on when to price grain. If the rating is low (under 30) and you do not have to sell right away, waiting may be prudent or if the rating is high (over 70) and you are debating on whether or not to make sales this may help you to make a decision as a topping market may be set to go lower.

The above positions are futures and options. Funds held a net long Chicago wheat futures position of an increased 1.33 to 1.0 margin, held a 4.92 to 1 net long position in K.C. wheat, held a large net long position in MN wheat, held an increased net long corn futures position of a 2.45 to 1.0, and held a decreased net long soybean futures position of 3.22 to 1 as of August 21, 2007.

COMMODITY INDEX FUNDS - WHAT ARE THEY AND HOW WILL THEY AFFECT THE FUTURES MARKET? According to a CFTC report these funds are said to have well over $100 BILLION dollars involved in the commodity markets vs. a figure of around $7 billion in 2001 and $40 billion in 2004. These larger funds often buy a broad cross section of commodities and figure that a majority of them will move higher thus they place less reliance on fundamentals of individual commodities. A new class of funds called sub-index funds allow investors to select single commodities not just the market as a whole. They are called "exchange-traded funds" or ETF's and their investment in the market is NOT included in the figures mentioned at the start of this paragraph. This type of buying may cause a shift away from short term fundamentals and might cause higher prices than fundamentals dictate should occur. Of course these funds will eventually sell to get out of their long positions which may cause some swift market price declines. The price decline is more likely to be from higher or profitable price levels for most producers.

The past month saw INDEX FUNDS decrease their net long WHEAT futures and options positions by 1.4%, decrease their net long SOYBEANS futures and options positions by 2.1%, and decrease their net long CORN futures and options positions by 3.44%. The futures markets saw DEC 07 corn futures fall around ($.03) the past month, NOV 07 soybeans rose $.29 the past month, and wheat prices moved over $.85 higher on OC futures which was clearly not tied to Index fund buying. The TRADITIONAL FUNDS were not a major driving force behind the wheat price advance as they increased their net long wheat futures and options positions by just 2,620 contracts or by 5%, decreased their net long soybean futures and options positions by 25,042 contracts or by 27.7%, and increased their net long corn futures and options positions by 22,036 or up 24.6% - all as of August 21, 2007 vs. July 24, 2007. A FACTOR to watch this month is what the Index Funds do with their positions. With crude oil in the $73.35 per barrel area, gold prices down just a little at $667 an oz, and the stock market up just 50 points at around 13,250 on the DOW and the NASDAQ up 40 points to 1,963 from a month ago, investors may feel comfortable with leaving their money in the Index funds as inflation may still be a factor in the market place. Index Funds should have ample reason to hold, not liquidate their long positions. Their selling usually occurs when investors request withdrawal of funds and/or at the end of the month or when they need to roll their positions.

It is the TRADITIONAL FUNDS (including the large grain and exporting firms) that are having the greatest influence on commodity futures prices. They are now holding a major long WHEAT futures and options position and could be a factor in driving prices down in September if the weather improves in some of the key producing nations. They have also increased their long corn positions without triggering a market price advance the past month. They have lessened their soybean long futures and options positions yet the market has risen the past month.

MARKET DATA'S AREAS TO WATCH THIS MONTH ARE:

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