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John Roach's DAILY GRAIN MARKETING PLAN

Overnight Trade

Dec Corn up 1/2

Nov Beans dn 1/4

Dec Wheat dn 5 1/2

Sell Signals

The corn, bean and wheat markets’ Sell Signals continue to be in buy territory. If you need to buy feed for a livestock operation, wrap up your purchases for now. There should be at least 1 and likely 2 more times to accumulate inventory on weakness between now and November following our Sell Signal Indicator.

Last Monday we gave the green light to our brokerage customers to begin liquidating corn and bean puts and we wrapped it up by Friday. 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 you think the crops are worse than traders realize and 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

Grains are acting like they might have found a bottom, but we haven’t yet seen any power to the upside. Wheat was the market we expected to lead us up first and the three wheat markets have, but each of the wheat classes are bumping up against the green line 20-day moving average. We believe market performance is very important around the green line and wheat prices have fallen away from their first attempt to clear the resistance.

Part of the reason grain prices are having a tough time moving higher is the weakness in the whole world of commodities. As you can see from the chart below, the DJ-AIG Commodity Index fell to a new low of this downward move yesterday before recovering late in the day.

From a technical point of view, the CRB-AIG index posted record highs in July and then proceeded to fall below its June and then its May low. If the index ends the month of July below its June low, which seems likely at this point, 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 (ETF) have experienced sharp losses this month, but traders are uncertain if the losses are enough to shake long-term investor confidence in the commodity markets. Will investors want to put more money into commodities now that they are “on sale” or will investors continue their orderly move out of commodities? So far, the move away from commodities has continued this week.

An example of investors’ change of heart from their attitude in June was the price reaction to the CRP announcement we have all been waiting for. A few weeks ago traders thought the opening of the CRP was almost a certainty and the failure of the USDA to get some of those acres into production would have likely given us limit up trade.

Early last night grain prices reacted with strength to Ag Secretary Schafer’s after the close announcement that the USDA will not reduce or eliminate penalties for early withdrawal of ground committed to the Conservation Reserve Program (CRP). His reason was the crops are better than we thought just a few weeks ago and that the corn price is down 24% and beans down 14% from their record peaks. Last night the rally following the announcement could not even hold one trading session (except for the 2009 crop year deliveries) as you can see from the overnight closes above.

In addition to Index Fund long liquidation, traders finally seem more worried about the efforts to reduce the level of speculative trading in certain markets than the tight fundamentals. Remember we alerted you in June about the problem that Index Funds were able to exceed speculative limits and that the powers in Washington would not allow that to continue. Pushing the CFTC to reduce speculation by change the hedging exemption rules Index Funds were granted or some other ploy were some of the very few things politicians could do to show they were doing something for voters complaining about food and fuel costs.

As we approach the August 12th USDA Crop Reports, traders will shift their attention to the size of the crop estimate we may get from USDA. That should give us some buying in the grain pits.

What is a farmer to do right now? Selling when there is no Sell Signal has proven to be a bad move most years at this time of the calendar, and you should refuse to do that. We will likely get another Sell Signal before harvest, but I wouldn’t plan on selling much on it. In the past several years farmers have regretted the sales they made in August through November.

I would rather get storage lined up for all the bushels you haven’t sold and plan on making sales during March, April, May, and June on Sell Signals. March through June sales on Sell Signals worked again last spring. The spring of 2009 promises to be as exciting as the spring of 2008 at least until we can be assured an adequate supply of new crop production.

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.