mason city 3 18 10 meeting

Grain Price Outlook and Market Strategies

Presented by: John RoachMarch 18, 2010

What fundamentals drove 2009 grain prices?

#1 - World Soybean Crop down 27.4 million tons = 34% of entire U.S. Crop

#3- On May 17 only 62% of the U.S. corn crop was planted

with Illinois at 20%.

Beans were 25% planted with Illinois at 1%

What are the Fundamentals Now?

Aug forecast +31.5 MMT Nov & Dec +39.4 - Jan +42.58 Feb & March +44.16 MMT

Tight stocks - loosening with S.A. harvest

2010 supplies becoming surplus

Prices likely peaked in January if no U.S. crop problem develops

S. America will still be shipping in Dec. hurting new crop bean price

Bean Situation and Price Outlook

FSU-12 Exports2007-8 – 27.47 MMT2008-9 – 54.71 MMT

2009-10 – 49.50 MMTU.S. Corn Exports

2007-8 – 69.89 MMT2008-9 – 51.17 MMT

2009-10 – 55.79 MMTU.S. Wheat Exports 2007-8 – 34.36 MMT2008-9 – 27.64 MMT

2009-10 – 22.45 MMT

Non – U.S. 58.9 Bu/Acre

World 80.3 Bu/Acre

U.S. 162.9 Bu/Acre

USDA 2009 World Corn Yields 12/10/09

World coarse grain and U.S. ending stocks ample - but likely to grow. Wheat hurting demand

U.S. ending stocks likely to increase due to smaller exports and feed offset by + ethanol

Livestock producers breaking even or better

We still need a big corn crop every year and should have spring strength in 2010

Corn Situation and Price Outlook

How Should I Market My Crops?

•Focus the majority of sales in the 1st half of the year

•March through June is usually best

Rule # 1

Chicago December Corn Futures, 1990-2005 average1-

approximate dates

Chicago November Soybean Futures, 1990-2005 average1-

1-Apr 1-

1-Aug 1-

approximate dates

Why Market Grain Aggressively?In the last 21 years,

Comparing December Corn Futures in March–June vs. Oct-Nov

•Dropped Significantly – 15 years•Drifted Sideways – 3 years•Increased Significantly – 3 years

Marketing Ahead is Correct 85% of the Time!

What is it worth?

The 5 Year Ave. of Dec corn during Oct – Nov $3.07 0.66

The 5 Year Ave. of Dec corn during Roach Mar – June Sell Signals = $3.73

What is it worth?

150 bpa X 0.66 = $100 per acre

•Sell only when markets are giving us a Roach Ag Sell Signal

Rule # 2

December 2007 Corn

Both Lines Over 75 = Roach Ag Sell Signal

Roach Ag Sell & Buy SignalsYour Digital Thermometer For Prices

Roach Ag Sell SignalsWhen Both Lines Are Above 75 = Sell Signal

Roach Ag 2007 Corn Sell Signals56 Days of Sell Signals ($3.91) and 272 Days Without ($3.71)

•Figure out the percentage of bushels you are comfortable selling each and every spring and tie that % to the your crop insurance policy coverage level

Rule # 3

•Make sure you have enough on-farm or other owned storage to hold the balance of a crop using your best ever yields

Rule # 4

•Make sure you sell enough in the spring prior to harvest to generate necessary cash-flow from harvest through February

Rule # 5

•Split your old crop bushels and new crop contracts into between 3 and 5 increments and sell one increment of each on each Sell Signal

Rule # 6

Put Opportunity - Buy Buy Puts on some of the Crop Puts on some of the Crop You Do Not Want to Sell You Do Not Want to Sell on a Cash Contracton a Cash Contract

December 2009 Corn Sales

What About the Grain You Don’t Want to Sell Ahead?

• Build Storage to hold increasingly larger yields• Increased infrastructure will reduce harvest bottlenecks• Reduce drying and shrink costs• Capture the futures carry available• Capture the improvement in basis and competition between bids• Space out your workload• Avoid extremely low harvest bids

• Price Risk– “If I sell, Prices might go higher.”

• Marketing Risk– “If I oversell, I won’t have enough money to buy-back my sales.”

• Buy Puts on spring Sell Signals• Hold them until an August – September Buy Signal• It takes advantage of the normal price decline • Cash in and wait until next year• May also sell Calls if margin calls don’t freak you out – you have to

fund Call option loss as it occurs• Spend about 30 cents on corn and 50 cents on bean• Frequently able to double your money – but will lose premium if

prices don’t go down

Cover Unsold Grain With Put Options

Put Option Charts

Basic Market Plan

Farm Name: Joe Farmer

Date : 1/28/2010 APH Yield Corn : 165

County Farmed: Black Dirt APH Yield Soybeans: 49

State: Midwestern

Crop Ins Type ra/crc/gripLevel of Coverage: %Livestock Y/N

Unpriced stored grain # of sell signals

Bushels to sell per sell signal in spring

of '10

Approximate bushels to sell per day for 5

2009 Corn 57,000 2 28,500 5,700

2009 Beans 15,000 3 5,000 1,000

Acres Expected Yield 2010 ProductionPlan to

Forward PricedBushels already

soldBushels to Sell

Spring of 10# of Sell Signals

Bushels to Sell per Sell Signal Spring of 10

Approximate Bushels To Sell per Day

2010 Corn 735 190 139,650 65% 5,000 85,773 4 21,443 4,289

2010 Beans 93 52 4,836 50% 900 1,518 3 506 101

Unsold Bushels

Estimated Number of Sell

SignalsPut Contracts to buy

per Sell Signal Total Contracts2010 Corn 48,878 3 3 10

2010 Beans 2,418 4 0 1.0

Old Crop in the Bin

New Crop Production

The Information Revolution is Driving the Long Term

Demand for Milk, Meat, and Eggs

Roach Ag Marketing, Ltd.

7601 N. Federal HwySuite 265-B

Boca Raton, FL 33487

800-622-7628

jroach@roachag.com http://www.roachag.com

mason city 3 18 10 meeting

corn roach ag marketing

roach ag sell signals

john roach

years marketing

roach ag sell signal

corn crop

days of sell signals

crop problem

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