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John Roach's DAILY GRAIN MARKETING PLAN

Overnight Trade

Dec Corn dn 1 1/4

Nov Beans dn 10

Dec Wheat up 3 1/2

On TV

Andy Shissler, Manager of our Chicago office, will appear on U.S. Farm Report and Ag Day this weekend. Check your local listings for times and channel in your area or you can see Andy’s report at: http://www.agweb.com/MediaLauncher2.aspx?show=USFR

Sell Signals

The corn, bean and wheat markets’ Sell Signals are struggling to find their way up out of 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.

What should a farmer be doing about marketing grain right now? There is no Sell Signal in any of our grains and making sales when there is no Sell Signal is usually a mistake. We will likely get another Sell Signal before harvest, but I really wouldn’t plan on selling much on it. In the past several years farmers have regretted the sales they made during 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. We expect the spring of 2009 to be just as exciting as the spring of 2008 at least until we can be assured an adequate supply of new crop production.

Markets

Asia-Pacific stocks today closed mostly higher: Japan +0.07%, Hong Kong +0.18%, China -2.74%, Taiwan -0.65%, Australia +0.82%, Singapore +0.14%, South Korea +1.14%, Bombay +0.48%. The European DJ Stoxx 50 this morning is trading +0.69%.

Traders are getting ready for the FCStone crop estimate due out on Monday and Informa later next week. Most traders expect the corn yield to be bigger than last month and some think they could be quite a bit bigger. The bean yield is more uncertain because of the lateness of the crop. Spring wheat estimates are getting smaller.

The USDA August 12 crop report data is being compiled now as field plots are being analyzed and if the crop conditions reports are right, the USDA will see corn and bean fields that are better than normal at this time of year with poorer rated spring wheat. The August 12th reports promise to be the most important in years.

Grains are acting like they might have found a bottom, but we haven’t yet seen any power to the upside. Wheat led the markets higher initially but each of the wheat classes bumped up against their green line 20-day moving averages. Market performance is very important around the green line and so far wheat prices have struggled to clear the resistance. The corn and bean markets should move up to at least their green line as well.

Part of the reason grain prices are having a tough time moving higher has been good weather combined with the weakness in economic news and commodities in general led down by energy markets. As you can see from the chart below, the DJ-AIG Commodity Index fell to a new low of this downward move this week before recovering. If the indexes can begin to sustain a move higher it will be positive to grain prices, regardless of weather.

One of the reasons index funds have been under pressure comes from the rebalancing diversified fund managers must make when asset classes revalue. Let’s say on January 1, 2008 a $1 million pension fund had 70% ($700,000) of their assets in equities, 20% ($200,000) in bonds, 3% ($30,000) in the DJ-AIG commodity index, and the balance ($70,000) in cash.

Today the S&P 500 is down 10% ($670,000) while the DJ-AIG index is up 30% ($40,000). If the bonds and cash are the same, the total value of the fund is now $980,000. In order to keep the dollar percentage of the commodity investments at 3%, the money committed to the commodity index has to be reduced to $29,400, requiring the manager to sell over 25% of their commodity index ownership to get from $40,000 down to $29,400.

Most of the commodity index exchange traded funds 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.

Traders continue focused on the efforts to reduce the level of speculative trading in certain markets. 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. Earlier this week the talk was that rule changes were coming. Then treasury officials indicated they see little evidence of market manipulation or excessive impact from speculation suggested there is less pressure for CFTC rule changes. Recently there was talk that the White House might veto any type of legislation that affects speculation was heard.

Corn Export Sales Slow While Bean Sales Surprisingly Strong

Old crop corn export sales dropped to a marketing year low this week at just 2.5 million bushels though combined old and new crop numbers were on the high end of trade estimates. Cumulative old crop corn sales are now up 9.3% from a year ago with loadings up 12.8% and the USDA forecasting annual exports up 15%.. Look for the USDA to cut their export forecast on their August 12th report.

Old crop bean sales of 10.0 million bushels were the biggest in 4 weeks and a 20-year high for week 47 of the marketing year. Soybean exports will likely need to be increased slightly for the old crop year.

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.