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John Roach's DAILY GRAIN MARKETING PLAN

Overnight Trade

Dec Corn up 7 1/2

Nov Beans up 19

Dec Wheat up 16 3/4

Sell Signals

The corn and bean markets’ Sell Signals slid back down into buy territory. The green light is on to resume accumulating feed needs. There should be at least 1 and likely 2 more times to accumulate feed inventory on weakness between now and November.

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.

Market

Asia-Pacific stocks today closed mixed: Japan -0.98%, Hong Kong +0.70%, China -0.05%, Taiwan -0.02%, Australia +0.29%, Singapore -1.80%, South Korea -0.97%, Bombay +0.29%. The European DJ Stoxx 50 this morning is trading +0.43%.

Until recently the CFTC allowed index funds the same exemption to speculative limits it allows commercial grain firms. Commercial grain firms are classified as hedgers and are required to have a cash position opposite of their futures position. If they own cash and have sold futures or need to buy cash and own futures, they have offsetting positions..

Since commercial grain firms’ futures or option positions offset cash transactions, they have been granted hedge status which exempts them from speculative limits. The logic is commercial grain firms have no financial incentive to move prices lots higher or lower because they have offsetting positions. Read more at: http://cftc.gov/industryoversight/marketsurveillance/speculativelimits.html

Index funds have been allowed the same speculative exemption because they establish futures and option positions to “hedge” the purchases investors make in their index fund. But this opened up the possibility that an entity or individual could get around the speculative limits by purchasing through an index fund. The index fund could use its speculative exemption to enable the investor to own more contracts than CFTC speculative limits allow. Index fund investors certainly do have an incentive to move prices lots higher and when that situation exists it must be controlled or somebody will try to corner a market.

We alerted readers last month that the pressure on the CFTC would increase until the CFTC addressed index funds ability to get around speculative limits.

The CFTC has been rumored to be visiting the offices of index funds. According to talk on the floor yesterday one large index fund was being reclassified and no longer granted hedge status. They were then forced, according to rumors, to sell all positions in excess of speculative limits, a rumored 40,000 contracts in both the corn and bean market.

Whether because of the CFTC or just market movement, index funds have been liquidating long ownership in recent weeks. The fear of CFTC forced liquidation and absence of any positive news was enough to bomb markets yesterday.

Having both FCStone and Informa come out with crop forecasts this week at or above the high end of expectations certainly has contributed to the continuation of the grain markets’ decline as well.

Right now the corn and soybean bulls have nothing stimulating them except margin calls which are stimulating them to sell. Wheat traders are being held back by the weak corn and bean trade. Welcome to a normal August market during which the season’s low in corn and beans is frequently posted.

A USDA attaché reported 2008-09 Argentine corn production at 21 million tons, well below the USDA’s current 23.5 million tons figure. Exports were pegged at 15 million tons, below the 16.2 million tons USDA number. Wheat numbers were also down, with 2008-09 output at 14.0 million tons (vs. 14.5 million tons July) and exports at 9.1 million tons, compared to 9.5 million tons in July.

Export sales were good today. Net wheat sales of 682,600 metric tons were down 6 percent from the previous week, but up 1 percent from the prior 4-week average.

Net corn sales of 337,900 tons were much improved from the previous week and 24 percent above the prior 4-week average. There were also robust sales of 710,900 tons made for delivery in 2008-09.

Net soybean sales of 374,400 MT were up 38 percent from the previous week and two and three-fifths times the prior 4-week average. There were also sales of 245,200 tons for 2008-09 delivery announced.

Weather forecasts continue to be beneficial to the growing crops.

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.