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John Roach's DAILY GRAIN MARKETING PLAN

Overnight Trade

Dec Corn up 7 1/2

Nov Beans up 6

Dec Wheat up 6 3/4

Sell Signals

The corn, bean and wheat markets’ Sell Signals continue to be in buy territory even though the markets closed higher overnight. If you need to be buying feed for a livestock operation, now is the time to accumulate some inventory.

Monday we gave the green light to our brokerage customers to begin liquidating corn and bean puts. Most of the puts purchased earlier in the spring were losers, but the sharply higher cash markets in June more than offset put losses. Puts bought in the last half of June were quite profitable again this year.

I am not sure it makes sense for a grain producer to re-own sold inventory at today’s prices, but if want to buy something, look at September call options. September call options are good until August 22nd and we should know lots more about the crop by then.

Markets

Asia-Pacific stocks today closed mixed: Japan +2.18%, Hong Kong -0.20%, China +3.26%, Taiwan +0.80%, Australia +0.76%, Singapore -0.04%, South Korea +2.31%, Bombay -1.11%. The European DJ Stoxx 50 this morning is trading -0.53%.

Although the rest of my letter is about the market fundamentals, I am not sure that is what is important right now. Look at the DJ-AIG index. This index is made up of 37.6% energy; 19.54% base metals; 16.57% grains; 8.9% precious metals; 7.59% softs; 6.97% livestock; and 2.74% soybean oil.

As you can see from the chart below, this index has dropped over 15% this month with nearly every sub-component losing value. Most of the commodity index exchange traded funds have experienced sharp losses this month, but nobody knows if the losses are enough to shake investor confidence in the commodity markets. Will investors want to put more money into commodities now that they are “on sale” or will investors head for the door in fear?

From a technical point of view, the CRB-AIG index posted record highs in July and is now below its June low. If the index ends the month of July below its June low, that would be a monthly key reversal on the chart. Monthly key reversals often signal a major top on the charts.

Lots of rain and a good forecast but grains still closed higher overnight. It was not an impressive performance and the highs last night did not get above the highs yesterday, but grains closed higher.

I don’t see much price positive news for grains other than the crops are late and need a long growing season. Some private analysts have bumped their corn yield ideas up to 155 bushels per acre. Certainly not everybody thinks yields will be that good, but the direction of change is toward bigger yields. At a 155 national yield, the carryover stocks at the end of the 2008 crop year would be in excess of 1.3 billion bushels. Last year on August 1st the crop was rated 56% good to excellent and this week it was 65% good to excellent with improvement likely with the current forecast.

It has been cooler than normal with above normal precipitation in much of the Corn Belt during pollination. According to Doug Jackson, FCStone’s research revels, “Historical weather production models clearly show a massive correlation of yields as much as 20 bushels over trend in states that experience a two degree below normal pollination temperature situation. Beneficial moisture over almost all of the belt is also associated with much higher than trend yields.”

I believe that’s what many traders began to think once they took that long July 4th weekend drive. The growing possibility of bigger yields than anybody thought possible happened to come as demand projections were reduced. The advancing malaise in the world financial news, a slowdown in world energy use, and tightening credit have helped drive corn, wheat and beans prices down in a big hurry.

As you know we were strong proponents of wrapping up sales before that fate-full long weekend. Each year the crop is looking better (don’t compare to prior years – compare to prior weeks) and the weather looks good complete your sales before the end of June. Get out your 2009 calendar and write down that you plan on wrapping up sales by the end of June. It works almost every year.

The wheat market should soon turn back higher. Wheat prices normally bottom about now and move higher most years. The U.S spring wheat crop has experienced dry weather stress before recent rains and world supplies will not get much bigger. The winter harvest is nearly complete and wheat is beating corn into the feed rations around the world giving us surprisingly strong demand.

Net wheat sales reported this morning of 610,400 metric tons were down 19 percent from the previous week and 4 percent from the prior 4-week average. Year to date wheat sales total 412,000 tons compared to a bigger than normal total last year on this date of 384,000 tons.

Net old crop corn sales of 323,500 tons were down 12 percent from the previous week, but up 2 percent from the prior 4-week average. Net sales of 499,600 tons for delivery in 2008/09 were also reported.

Net bean sales of 183,000 tons were big, up two and nine-tenths times from the previous week and two and one-forth times from the prior 4-week average. Net sales of 552,400 MT for 2008/09 delivery were also reported.

These data and comments are provided for information purposes only and are not intended to be used for specific trading strategies. This commentary is written as a daily marketing tool to help farmers sell the grain they raise. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. Commodity trading involves the risk of loss, and you should fully understand those risks before trading.