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Milk undervalued

Agriculture.com Staff 07/03/2008 @ 9:13am

Cheese models state the intermediate down trend from the high of May is due to bottom now. Valuation indicators suggest cheese is undervalued and weekly based technical indicators are oversold. Models forecast a rally for July. The long term forecast is bullish cheese into at least Sep and now more likely 2009.

MILK

Futures have declined a little longer and lower than expected. Futures had been leading cheese and I had hoped the market place to remain so. Not the case. The trade now puts price of futures in-line with the cheese forecast. And the timing is within model parameters. So I expect a bottom this week or next and the forecast is bullish milk futures for Jul. The long term forecast is bullish milk price into Sep at least and now more likely to continue into 2009. Minimum objective for 2008 is $25 C3. Long term valuation studies suggest milk is now worth $30 but in relation to models and the some time slacker trend of milk relative other commodities we may have to wait until 2009 for $30. Pay now or pay more than necessary - later. What I mean by this is extreme mega longterm trend overvaluation does not begin until $34.

WEATHER

Since 1993, I forecast a major weather crop impact to occur 2004 to 2008 for corn. I also forecast the same for wheat and perhaps soybeans. We have seen this decade's weather impact for soybeans and wheat but not for corn. And research allows for additional impact for all 3 markets into end of decade. On a short term basis the crop model which correctly forecast an early year decline and forecast an early Jul improvement now forecasts a peak next week or the following. Suggests risk of lower yield for late Jul. And today, I learned of chance for higher temperatures to come. With small root penetration I leave my long term risk forecast as high for corn production.

GRAINS

The corn user is at risk of $8.50 to $11.00 corn. Last week, I told grain grower followers some of whom were as little as 7% sold to increase sales. But we must keep in mind corn could go much higher.

Soymeal- The long term target for some time now has been 430 to 510 for OCT. Trend may last into year-end. I am in no hurry to state otherwise.

Soybeans-I have advised no more than 1/3 sold NOV for producers and I now feel beans are worth $17 to $18 NOV. Follow the trend. Strong demand and small supply -for now.

Dow stock index- I took a chance a longterm bottom could arrive early but decided to buy on the way up than down. Let someone else blaze a trail first. This has paid off, as I did not buy for the BC3 program and still enjoy 512% from 1991 versus a longterm and hold example from 1991 that is now below 350%. My forecast is bearish stocks for 2008 but I expect a recovery for 2009. I believe the bearish stock market is from over reaction of inflation. In 1974, investors dumped stocks for 60% decline while grain price sky rocketed and gold woke up from a deep sleep. Inflation increased into 1980 but so did the price of the Dow stock index. Guess stock investors should have paid more attention to timing than inflation. So I assume the stock market is more of a financial sector problem while the rest of the nation moves on to better days.

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