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John Roach's DAILY GRAIN MARKETING PLAN

Overnight Trade

Dec Corn up 1 1/4

Nov Beans up 2 1/2

Dec Wheat up 2 3/4

Sell Signals

The corn, bean and wheat markets’ Sell Signals continue to be in buy territory. 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%

Weekly corn export sales yesterday came in at 323,000 tons vs. 412,000 tons last year. Cumulative sales are now up 11% and loadings up 13% from last year at this time with the USDA forecasting annual exports up 15%. Look for further cuts in the USDA export forecast in their August report.

Cumulative soybean export sales are up 1% and loadings are even with a year ago with USDA forecasting annual exports down 1%. The Soybean export forecast might be inched up a bit on the August report.

Lots of rain in areas again overnight and a favorable weather pattern well into early August is the forecast. In fact FCStone’s weather guru is calling for heavy rains in the central Corn Belt over the weekend and into next week. Traders are starting to compare this year with 1994 or 2004 weather when U.S. corn yields set new national records of 114% and 109% of their respective trend yields those years. Not all years that have experienced below normal temperatures and above normal precipitation have produced above normal yields, but in almost every year corn achieved at least trend yields.

On the other side of the yield question, FCStone estimates 40% of the crop will not be mature by October 1 which is close to the normal frost dates in the far northern states. The trade is fearful of the possibility of a 10% frost loss on 40% of the crop that could affect nearly 500 million bushels worth of production and critically alter supply demand expectations late in the season.

Grains are acting like they might have found a bottom. We haven’t seen any power to the upside however.

Argentine soybean crush dropped 42% in June, compared with the same month last year, due to the effects of the farmer strike. The country crushed 1.9 million tons of beans in June, down from 3.25 million tons in June 2007.

A private analyst from the firm Prozerno estimated that the Black Sea region could export an additional 10 million tons of grain in the current crop year, in comparison to an estimated 26 million tons in 2007/08. Russian crop yields are potentially the best in nearly 20 years and Ukraine’s crops are also very good eliminating the export curbs which were implemented there last year due to drought.

The U.S. House Ag Committee approved the “Commodity Markets Transparency and Accountability Act” yesterday, toughening position limits on oil and other markets in an attempt to block excessive speculation. The bill can be called for a floor vote next week. It basically gives the CFTC more power to regulate futures, OTC, and foreign markets, calls for more reporting power for index funds, and adds 100 new CFTC employees.

Although I have been writing about the fundamentals of the grain markets, I am not sure that is what is important right now. Look at the DJ-AIG index chart below. 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. 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.

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?

With weather looking good and a long time before we will trade frost worries, the direction the commodity indices move will be very important to the price of grain.

Soybean Crush Slows

Yesterday morning the Census Bureau reported U.S. June soybean crush at 140.9 million bushels, at the high end of trade estimates but well below both last June’s 148.7 million bushels and the revised 152.6 million bushels last month. The crop year total crush is now 23 million bushels above last year but unlikely to reach the USDA estimate of a 34 million bushel year to year increase. June domestic meal usage estimated down 8% from last year signaling feed rationing.

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.