John Roach's DAILY GRAIN MARKETING PLAN

Andy Shissler and Greg Milkovich of our Downers Grove office will be conducting a grain marketing seminar in Davenport, Iowa on January 26th. Click here to view the details, additional seminar dates and to reserve a seat.

All of the grains are in Buy Signals except for beans and soybean meal. Soybean and meal prices have turned up in recent trade without giving us a Buy Signal which is a show of strength.

We encourage you to extend your corn for feed coverage during weakness over the next week. Although we think going slow with purchases on this Buy Signal is likely the right course, the corn market can trade at much higher levels if the dry South American areas miss the upcoming weekend’s expected rains.

We are less enthusiastic about making wheat purchases because of plentiful supplies.

For those who would like to sell, it will likely take a little time to get markets back to a Sell Signal. That being said, we encourage you to wait. We don’t want to make any sales when we are not in a Sell Signal.

We expect more Sell Signals because of concern for crops in S. America followed by those same worries for the U.S. and other Northern Hemisphere crops. We plan on using Sell Signals during the next round of crop worries to make incremental sales of 2011 and 2012 crops. We are planning on being done with all sales by mid-July.

The Euro has bounced higher while the Dollar has finally turned lower. Yesterday, the Dollar Index fell down through its green line 20-day moving average. Now we will have to wait for continued follow through on this break. Grains have taken the Dollar break as a window to buy after the USDAs bearish report.

Click to view the ethanol summary

U.S. corn for ethanol demand continues to hold a strong pace into the crop year’s Q2. Yesterday’s weekly ethanol production number at 100.6 million bushels of corn, remains above the 89 million bushel pace needed to hit the current 5 billion bushel number.

The one caution I have is whether incremental ethanol production will just go into inventory or will blenders actually use it. Ethanol producers have been cranking out more ethanol but stocks have also continued to climb. If inventory levels continue to grow, true demand to blenders must increase or weekly production will need to back off. The good news is we are ahead of pace. The question is where does true demand lie at the pump?

After recent price breaks in corn and soybeans, U.S. export prices have regained competitive pricing. Weekly U.S. corn exports reported this morning were 29.9 million bushels, with Mexico, South Korea and China all securing U.S. corn.

Weekly soybean export sales were also strong at 36.4 million bushels, with China doing most of the buying.

Weekly wheat export sales numbers were also strong at 21.6 million bushels for the week, up 61% from last week.

Basis levels continue to gain strength while spreads have tightened after the recent decline in futures prices. Supported by tighter available supplies while farm sales remain sparse, national corn basis strengthened to 17 cents under the March contract while soybean basis rose 2 cents, closing at 51 cents under the March contract.

Better news on China continues to support the soybean/meal complex this week. Last night HSBC bank reported PMI (Purchasing manager index) at 48.8 versus 48.7 in December. It is not that there was significant improvement as much as it remains steady, hopefully leading to a softer landing.

Bearish China investors are watching for slowdowns beyond what is already in the market. Late last week, China GDP was reported at 8.9%, better than expectations although still on a decline. In the chart below, Chinese business sentiment is better represented by the bearish trend in their stock market. Chinese markets will be closed all of next week for the Lunar New Year holiday.

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No change in the outlook for rains this weekend in S. America. Rainfall expectations for dry areas of Argentina continue today with ½ to 1 ½ inches expected (starting Saturday) across much of the driest areas. Longer range maps go back to dry and less than normal precipitation.

Markets have largely digested the worst case scenario for crops in S. America for now. Ideas of smaller production numbers in upcoming reports are already reflected in current market sentiment. Looking forward, we might expect a broad sideways trading range to exist as demand growth slows and the potential for larger world production numbers continues to catch up. If things in S. America get worse, expect futures prices to add risk premium accordingly.

We will wait until the next Sell Signal before we make any further sales.

FCStone Research

The Buenos Aires Exchange cut their 2011/12 Argentine corn (commercial use) planted area estimate from 3.74 to 3.70 million hectares, due to drought effect; soy area was left steady at 18.85 million hectares, with wheat production also unchanged at 14.0 million tons. Meanwhile, the Argentine government increased their total corn acreage to 5.0 million hectares, up from 4.9 million previously, while slashing soy plantings 200,000 hectare to 18.8 million hectares. They see wheat production at 13.4 million tons, though that was sharply higher than their prior 12.0 million ton estimate. The government did report corn yields being slashed 20-50% so far.

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Click here to view the history of our sell signals