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John Roach's DAILY GRAIN MARKETING PLAN

Overnight Trade

May Corn up 2

May Beans up 21 1/2

May Wheat up 12 3/4

Sell Signals

As soon as the markets opened on Friday, beans entered their 1st day of a Roach Ag Sell Signal, even though bean prices were trading lower. Today will be the 2nd day of the bean Sell Signal and we want to continue with our daily sales over the next 4 days. We are recommending making sales of an increment of beans in the bin and an increment of new crop that you cannot store on the farm. We expect at least one more bean Sell Signal during our Selling Season, so calculate your sales increment accordingly.

We also want to buy November bean puts on this Sell Signal. You will find that November bean puts are very high priced as they were on the last Sell Signal. Yet the $9.00 to $12.00 strike priced bean puts purchased on the last Sell Signal increased in value from 300% to 500% when bean prices dropped.

The extended corn Sell Signal is nearing its end. 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 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, since we are fully involved in a weather scare.

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

Wheat markets are struggling in their effort to go higher, but we will wait for the next Sell Signal to make additional sales.

Markets

Some of the Asia-Pacific stock markets today were hit very hard on disappointment over the G-7 statement and on earnings concerns: Japan -3.05%, Hong Kong -3.47%, China -6.54%, Taiwan -0.19%, Australia -1.78%, Singapore -2.68%, South Korea -1.86%. The European markets are trading moderately lower with the European DJ Stoxx 50 down -0.86%.

The USDA Reports did not give traders much new to trade, but confirmed the bullish case for corn that has been developing since harvest. Corn prices were further stimulated by the cold wet weather which worried traders about your ability to get the crop planted in a timely fashion. Improved planting conditions (if forecasts are right) likely put a top in the corn market for this price surge.

Phil from Missouri, a relatively new subscriber, expressed his frustration with marketing. “It has been so hard to market when I have listened to fundamentals most my life….and the funds just do what they want to do and if you get in front of them is like a run away train and you get run over. I know the funds have given us this high price and that is a good thing. Now even Cargill will not book any fall grains. I can’t imagine how much margin they have had to put up….I hedged some wheat and corn for 08 and put up the margin. If I did all my corn and beans on futures my bank wouldn’t understand my margin calls. I farm about 4500 acres and am not asking you for anything…grins.just trying to give you a grip how hard it is to market when it doesn’t matter about fundamentals anymore.”

Fundamentals still rule over time. But markets are in the process of figuring out the price range of each grain market when demand is bigger than apparent supply. Right now the market is searching for the top of the price range in this new environment. This should not be a surprise because grain markets are almost always searching for a top at this time of the year. We also know that next harvest, assuming good crops, the market will be searching out the lower side of the price range..

As I said in Friday’s Daily Grain Plan, you should keep an open mind as to what those upper and lower price boundaries might be. They will most certainly be determined by speculative traders exiting losing positions. And as you know, speculative traders exiting losing positions will have very little to do with the exact fundamentals at the time.

Bryan from Illinois asked, “I am reading what you said in regards to the 2008 new crop supply being understated and next years demand being overstated. How do I take advantage of the good prices now for 2009 corn crop? My grain elevator quit buying anything past 2008 crop. They said their bank will not fund the margin calls for any 2009 and 2010 crop contracts. Any suggestions? Where did the USDA video reports go that you were doing? I really thought they were excellent and very informative.”

Bill Mayer, Manager of our Lexington, Illinois office, had another way of looking at 2009 grain sales and put values. He said, “Personally, I think the basis for 09 could improve enough to pay for at least a good part of your put option premium. Using puts instead of short futures just makes a lot of sense. And the values really aren’t that bad. For example, the at the money December corn 2008 put is 77 cents and the at the money December corn 2009 put is 91 cents. That seems like a bargain to me – 15 cents for a whole more year – about 1.25 cents per month. There is nothing wrong with making some cash sales, if your local buyer is in the market for 2009, but using puts seems attractive to me as well.”

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.