John Roach's DAILY GRAIN MARKETING PLAN

02-22-10 Daily Grain Plan

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Travels

Thursday, February 25th John Roach will be working with Woofter Construction and Irrigation in Colby, Kansas. John will be speaking at the Comfort Inn Convention Center, located at exit 53 on I-70. The program begins at 3:30 PM and is free and open to the public, but you must register in advance. Please call Shannon at 785-462-7441 to reserve a seat.

Sell Signals

There are no Sell Signals in our grain markets.

Friday I wrote about how frustrating selling grain can be when Sell Signals don’t work exactly the way we hope. Unfortunately whatever tools we use to help us to decide when to make sales, there will be times when the tool lets us down. Or because we are optimistic about prices we can choose to “go slow” on sales when we should have followed our plan and pulled the trigger.

Maybe just maybe the markets will vindicate my go slow approach on last week’s soybean Sell Signal. Today markets feel much better than they did Friday morning. Instead of continuing lower, prices have rebounded nicely.

Beans broke right down to the green line 20-day moving average and it held. I found during our seminars that describing the green line as a “wall holding prices in their existing trend” helped people understand the concept and importance of the 20-day moving average. Prices can bang against the wall or even break through it, but watch price action carefully because it is a very big clue as to trend changes and future price moves.

If prices are above the average price of the past 20 days (the green line on the charts is the 20-day moving average) the market is in an uptrend. When prices are in an uptrend, technical traders will try to be buyers instead of sellers. This is very important right now because the big professional speculative funds sold out their long positions from early January through early February. If the trends turn back up, they will buy back everything they sold.

Most of the big fund managers use a computer program to dictate if they are buyers or sellers. The computer program uses a proprietary formula to call the shots but the premise is to get with the trend.

Beans threatened to break down through their green line last Friday but prices quickly rebounded after the test of support. Overnight beans moved up well away from their green line 20-day moving average.

The corn market broke down through its green line, but prices could not stay down. Overnight the corn price cleared the green line with power and anybody who was a seller at the end of last week has a loss this morning.

The wheat charts do not give quite as clear of picture but overnight prices moved back above the green line.

I think there is a good chance the next Sell Signals may come soon. When markets breakdown and can’t make downside progress as in the case of corn and wheat, or can’t even get below the green line as in the case of beans I get encouraged. What happened at the end of last week seems to have trapped the bears instead of scared out the bulls.

Our Selling Season begins next month – get ready.

Markets

The U.S. Dollar eased back a bit overnight which helped grain prices move higher.

The CFTC Commitment of Traders Report showed that actively managed funds came back as buyers in the grains during the week ended last Tuesday. The funds were long 409,000 option and futures contracts of grains on January 2nd and sold down to only 22,000 longs by February 6th. Last week they bought nearly 53,000 contracts. We have been counting on their buying to take us up to Sell Signals and it was exactly what happened last week.

For several years running managed funds have made lots of money following the up-trends that began in the winter. Why shouldn’t we expect them to do the same thing this year? The grain markets look like February lows are more solid than they appeared on Friday and up-trends are beginning. We think the funds are likely to buy back everything they sold in January.

During the month ended February 6th, index funds accumulated 120,000 contracts of grain and commercial grain companies covered 293,000 contracts of shorts as they sold cash inventories to users. Last week commercials sold 62,000 contracts as producers sold grain and their buyers hedged by going short.

Friday afternoon’s monthly Cattle on Feed report showed the February 1 on feed total at 97.4% of last year, January placements at 98.2%, and January marketing at 102.1%. All numbers were within pre-report estimates but will likely be taken as price negative for the deferred months.

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.

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Front Month Futures

Mar ‘10 Corn

Mar ‘10 Beans

Mar ‘10 Wheat

3.65

+ 5

9.52 3/4

+ 7 3/4

4.92 1/2

+ 2 3/4

New Crop 2010

Dec ‘10 Corn

Nov ‘10 Beans

July ‘10 Wheat

4.02 1/4

+ 4

9.32 1/2

+ 6 1/2

5.18 3/4

+ 2

World Markets

S&P 5001,109.17+0.21% Europe DJ Stoxx2,793.83+0.01% Japan10,400.47+2.74% Hong Kong20,377.27+2.43% China3,233.34-0.55% Taiwan7,560.04+1.59% Australia4,717.50+1.78% Singapore2,757.46+0.01% South Korea213.28+2.19% Bombay16,237.05+0.28% Libor0.25+0.09%

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