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John Roach's DAILY GRAIN MARKETING PLAN

Overnight Trade

May Corn up 2 3/4

May Beans dn 2 1/2

May Wheat up 10 1/2

Sell Signals

The positive USDA Report and worries about planting delays have moved the corn market into an extended Roach Ag Sell Signal. We have wrapped up sales of the bushels we wanted to get sold on this Sell Signal. We expect at lease one more Sell Signal in corn and will wait until the next market peak to make any additional sales. The actual price we get on the next Sell Signal will be determined by weather in all likelihood and may well be at a lower level than today’s price.

We continue to buy corn puts and we want to cover up to ¾ of the new crop corn you plan on storing unsold.

We have no Sell Signal in beans or wheat but both markets have bottoms posted on their charts. Beans have surged up and may give us a Sell Signal as soon as today. We will use our automated phone system to notify you as soon as there is a bean Sell Signal.

Markets

Asia-Pacific stocks today closed higher nearly across the board: Japan +2.92%, Hong Kong +1.99%, China +0.77%, Taiwan +0.91%, Australia -0.13%, Singapore +2.03%, South Korea +1.04%, Bombay +0.72%. The European DJ Stoxx 50 is down -0.68%..

The USDA Reports did not give traders much new to trade, but confirmed the bullish case for corn that has been developing since harvest. The new corn market stimulus has been the cold wet weather which has worried traders about your ability to get the crop planted in a timely fashion. Improved planting conditions will likely put a top in this corn market price surge and warmer dryer weather is the current forecast for next week.

Al from Iowa asked, “In your daily commentary would you address your long term thoughts? Is this a bubble in the commodity markets, and we will see a collapse as in other markets. Will the inflationary issues of the economy drive the commodities for the foreseeable future? Any long term thoughts would be appreciated.”

Thanks for your question Al it gives me just the opportunity I wanted to talk longer term. Nearly 2 years ago I appeared on Market to Market and talked about my belief that our grain markets would move to a new plateau of record high prices. Growth in world food and bio-fuel demand would be the drivers that would take prices to record highs. As it has turned out the weakness of the U.S. Dollar added a third price driver. Readers of this letter might remember my push to get them to build more storage rather than sell corn for less than the cost of production. It was less than 2 years ago the price of cash corn was near $2.00.

I believed then that the peak of the “new price plateau” would occur when inventories in the bin were tight and a weather scare would be threatening future supplies. I also believed that the peak would occur during our prime Selling Season of March, April, May, and June. I encouraged producers to keep an open mind about how high prices could go to reach the peak. We never know how high a bullish market has to go to ration the usage.

Wheat was the first market to give us an impossibly tight supply demand balance table led by Minneapolis spring wheat. Beans were the second to make a run and corn is in the midst of its run to record prices. You might call the time spent pushing to successive record prices the “bubble stage” of a market as we saw in both wheat and beans when the bubble burst in March prices fell sharply. But, I don’t expect prices to go back to their pre-2005 price range.

I do expect prices to define the lower side of this new price plateau, and I again encourage you to keep an open mind as to how low that might be. I expect that bottom to come near harvest when (contrary to everybody’s worst fears) crops turn out to be bigger than expected and demand projections were too big. Could that be this year?

Although each producer reading this letter is doing everything they know how to do to get record yields, everybody is using 30 year trend line yields in their calculations. Although livestock producers are losing money on each animal they sell and bio-fuels offer no profits for the new crop year, demand projections are to use even more grain. I think the 2008 new crop supply is being understated and next year’s demand is overstated.

This is a very good time to get sales of corn up to where you need them. The next Sell Signals on beans and wheat will be a similar time to get sales up to where they should be when profits are as large as they are now.

Cathy from Iowa asked, “Is there a website which lays out in month format when the USDA reports are released, especially Supply & Demand/Crop Production Reports? Thank you for providing this information to me.”

Here is the one I use: http://www.nass.usda.gov/Publications/Reports_By_Date/index.asp

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.