Search

Search:

John Roach's DAILY GRAIN MARKETING PLAN

Text Only Version

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, 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

Beans rallied sharply then fell like a stone. After all of that, beans are still in a Sell Signal and this is day number 5.

Bean prices have certainly been volatile recently. We should probably expect that volatility to continue with plenty of selling over the top of the market. South American harvest is well underway and producers there have lots to sell.

On this Sell Signal we want to sell old crop beans out of the bin, new crop 2010 beans, and small pieces of any crop year beyond.

During our recent seminars we encouraged farmers to sell more of their 2010 crops than normal and to be willing to price pieces of distant years’ crops during this spring’s Sell Season. Farmers’ are concerned about inflation however and it is keeping them from making sales. Today we heard from two of those concerned farmers who sent us these well written notes.

Levi from Iowa expressed his worry about inflation and optimism about demand when he asked, “You talk about selling out farther than just 2010 crop. How much and how far out should we look at selling especially with volatile input prices? If we can’t lock in inputs why should we be capping our income already, even when prices aren’t all that high? Or do you recommend buying future positions and work as a speculator?

You also talk about surpluses and prices coming down. Do you foresee prices coming down with added demand, China’s population and demand for protein, ethanol, and decreasing acres of farmland? Yes yields are increasing, but isn’t our demand and with that won’t prices at least stay relatively stable if we can call this market stable. I’ve been a subscriber for almost a year now and have used your sell singles accordingly and have been successful. I also appreciate the daily reports they are very informative and easy to digest. Just looking for a little more insight and your thoughts.

Myron from Nebraska said “I just told my son yesterday, who farms with me how following your marketing plan using sell signals to make sales has taken a lot of stress out of marketing and seems to work fairly well as I become more familiar and comfortable with it, but then this morning you talk of marketing some of the crop of 2011, 2012 in February of 2010.

I always thought the first and most important basic of marketing anything was to know your cost of production. It seems to me that if you don’t at least have an idea of that number, you are moving more towards speculation rather than good sound marketing. With inputs what they are even now, a sizable shift in interest rates alone could make a major difference, much more than in the distant past. Just puzzled me a little when I thought I had you strategy somewhat figured out.”

.

We are actually making the same recommendation we have made for years. We always encourage producers to look out further for sales opportunities during our Selling Season. We especially like making those distant sales on extended Sell Signals. Producers who routinely sell crops 2 or 3 years ahead usually keep those sales relatively small because of the uncertainty of costs.

The problem might be that producers are more optimistic about grain prices next fall than we are. Certainly Chinese soybean demand is growing and is expected to set a new record this season at 42.5 million tons, but this year the world soybean production is up over 43 million tons. This year’s soybean crop increase is bigger than the total annual Chinese imports.

World coarse grain stocks are expected to be tighter than bean stocks just before you begin harvest in 2010, but wheat stocks will be big. When you add world coarse grains and wheat stocks together (which is the right thing to do because many areas of the world feed both) the combined stocks will be big (and have been growing) this fall.

We only encourage sales in future years when the prices make sense on your farm. Now is the time for you to think about what prices make sense to you. Estimate your costs for 2010 and beyond using big yields. Yields are going up – don’t use your past 5-year average. Decide what prices would make sense on your farm.

How many bushels would you sell at that minimum price on the 10th day of a Sell Signal, the 15th day and the 20th day? What would be your second acceptable price level? It is much better to make those decisions (and write them down) now in the calm of winter than in the heat of battle when you are busy and markets get exciting.

It is a mistake to dismiss sales of distant years’ crops because of the uncertainties involved. You will be selling corn and beans in all the years where there are futures trading. Decide what prices you are willing to take. It is OK to make sales of distant years at prices that make sense to you during Sell Signals between March and June. In fact, we recommend it.

After speaking with several hundred farmers in the past month, we think many farmers are too bullish on prices and too concerned about inflation.

Markets

Yesterday’s strength in the U.S. Dollar driven by weak consumer confidence is steering grain markets lower. The trend still appears to be higher although bulls are still looking for more upside news.

The grain markets’ February lows look solid and up-trends have begun albeit in a very volatile way. We believe funds will buy their longs back and South American farmers will sell their record large crops. In addition everybody will step up their worry about how much snow is covering the fields and how cold it is everywhere.

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.

Services | USDA Data | Weather | Home

To Manage Your Subscription Click Here

Front Month Futures

Mar ‘10 Corn

Mar ‘10 Beans

Mar ‘10 Wheat

3.70 3/4

+ 3.0

9.57

+ 4 1/2

4.91 1/2

- 1/4

New Crop 2010

Dec ‘10 Corn

Nov ‘10 Beans

July ‘10 Wheat

4.05 3/4

+ 2 3/4

9.30 3/4

+ 3 1/2

5.17 3/4

- 1/2

World Markets

S&P 5001,094.60-1.21% Europe DJ Stoxx2,732.05+1.48% Japan10,198.83-1.48% Hong Kong20,467.74-0.75% China3,244.48+1.43% Taiwan7,529.67-0.89% Australia4,648.50-1.48% Singapore2,762.14-0.73% South Korea210.92-1.19% Bombay16,255.97-0.19% Libor0.250.00%

Click here to see the full size Dollar Index Chart

Click here for the full size Heating Oil Chart

Click here for full size Ethanol Chart

Click here for the full size DJ-AIG Index Monthly Chart

Click here for the full size Corn Chart

Click here for the full size Soybean Chart

Click here for the full size Meal Chart

Click here for the full size Wheat Chart