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Ray Grabanski: Time to start selling grain?

Ray Grabanski 07/14/2010 @ 11:00pm President, Progressive Ag www.progressiveag.com

Grains have had a sharp rally since June 29th when we made our lows for recent
prices.  Corn has rallied over $.50, beans $1, and wheat about $.75 since that
time, and now we have to ask ourselves, "How much is enough?"

Corn has been the leader of this rally, as corn prices have rallied on news of
smaller than expected acreage planted in the US, combined with smaller stocks
levels and higher feed use than anticipated.  That puts the corn ending stocks
in what could become a relatively tight situation.  While USDA is currently
projecting a 1.3+billion bu carryout, that is using a 163.5 bu/acre crop, and
currently Pro AG expects the crop to be smaller than that due to adverse weather
in June.  If we continue to tighten up the stocks situation by cutting yield
potential through the growing season, we could have a very interesting situation
in corn for 2010!  Especially with the Chinese buying steadily each week (about
2-5 mb/week), keeping our exports strong and our projected carryout uncertain
for the end of the year.

Wheat stocks are more plentiful in the US, but there also have been some world
crop production problems which have shown up recently that could further tighten
ending stocks.  For example, Canadian wheat production estimates were cut 4 mmt
in the last July USDA report, and there might be more cuts coming as they have
had some very adverse weather so far in 2010, especially in Saskatchewan where
up to 25% of the crop remained unplanted, and drowned out acres also are taking
their toll on projected crop sizes. 

While soybeans have not expected to be tight in the US (360 mb ending stocks
projected), there is a hint of heat developing in the Midwest in the current 14
day forecast, with warm temps the coming week (2-8 degrees above normal).  The
8-14 day forecast intensifies the heat, and perhaps we will have even more
problems with soybeans during pollination/bloom than corn!  There still is time
to hurt the soybean crop more severely than the other grains if heat sets up in
the corn belt, and that is a concern to the soybean market right now.

So while trend have clearly become higher for all grains due to adverse weather
so far in 2010, prices have already built in some of those problems with Dec
corn already over $4 as of this morning, and Dec10 wheat at 6.11 with Nov.
soybeans nearing $10.  These are price levels Pro Ag set earlier in the year to
make sale at, so if you do not yet have enough 2010 crop sold, now would be a
good time to make catch up sales, and perhaps even advance sales another 10%.

However, don't get too carried away, as the trend is still higher in all grains
and is showing potential to rally further by breaking above recent resistance
marks this morning. 

Sometimes, the cookie plate only goes around once, and its best to take 2
cookies when it does because it may not come around again.  But so far in 2010,
we have have a number of opportunities to sell $4+ corn, $6+ wheat, and $10+
soybeans.  This week again we are at or close to those same opportunties, so the
cookie plate has already come around a few times on 2010 crops.

How many times does it need to for us to take advantage of these
opportunities???   And for this current rally, how much more potential is there
before prices reach their peak??? 

These are some great questions, and in some cases only you, the grower, can
answer the question of when you will sell.  But as for price targets for this
current rally, some potential price targets would be $6-$6.50 for potential tops
in wheat, around $4.50 corn, and perhaps $11 soybeans are possible given the
right production situation (Heat that lingers through August and into
September?).  But one has to weigh the odds of rallying further against the
possibility of missing the current rally on at least some sales.  So as Richard
Pryor's famous question his friends asked him during his difficult period in
life, "What you gonna do, Richard?" could problaby change to "What you gonna
do, Mr. Farmer?" in this case.
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The information contained, while not guaranteed as to accuracy or 
completeness, has been obtained from sources we believe to be reliable. The 
opinions and recommendations contained are based on our judgment and do not 
guarantee that profits will be achieved or that losses will not be incurred. 
Recommendations should not be construed as an offer to buy or sell 
commodities. There is substantial risk of loss in trading futures and 
options on futures.

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