Mason City 3 18 10 Meeting

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Mason City 3 18 10 Meeting

  1. 1. © Roach Ag Marketing, Ltd. Grain Price Outlook and Market Strategies Presented by: John Roach March 18, 2010
  2. 2. © Roach Ag Marketing, Ltd. What fundamentals drove 2009 grain prices?
  3. 3. © Roach Ag Marketing, Ltd. #1 - World Soybean Crop down 27.4 million tons = 34% of entire U.S. Crop
  4. 4. © Roach Ag Marketing, Ltd.
  5. 5. © Roach Ag Marketing, Ltd. #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%
  6. 6. © Roach Ag Marketing, Ltd. What are the Fundamentals Now?
  7. 7. © Roach Ag Marketing, Ltd. Aug forecast +31.5 MMT Nov & Dec +39.4 - Jan +42.58 Feb & March +44.16 MMT
  8. 8. © Roach Ag Marketing, Ltd.
  9. 9. © Roach Ag Marketing, Ltd.
  10. 10. © Roach Ag Marketing, Ltd.
  11. 11. © Roach Ag Marketing, Ltd.
  12. 12. © Roach Ag Marketing, Ltd.
  13. 13. © Roach Ag Marketing, Ltd.
  14. 14. © Roach Ag Marketing, Ltd.
  15. 15. © Roach Ag Marketing, Ltd.
  16. 16. © Roach Ag Marketing, Ltd.
  17. 17. © Roach Ag Marketing, Ltd.
  18. 18. © Roach Ag Marketing, Ltd.
  19. 19. © Roach Ag Marketing, Ltd.
  20. 20. © Roach Ag Marketing, Ltd.
  21. 21. © Roach Ag Marketing, Ltd.
  22. 22. © Roach Ag Marketing, Ltd.
  23. 23. © Roach Ag Marketing, Ltd.
  24. 24. © Roach Ag Marketing, Ltd. <ul><li>Tight stocks - loosening with S.A. harvest </li></ul><ul><li>2010 supplies becoming surplus </li></ul><ul><li>Prices likely peaked in January if no U.S. crop problem develops </li></ul><ul><li>S. America will still be shipping in Dec. hurting new crop bean price </li></ul>Bean Situation and Price Outlook
  25. 25. © Roach Ag Marketing, Ltd.
  26. 26. © Roach Ag Marketing, Ltd.
  27. 27. © Roach Ag Marketing, Ltd. FSU-12 Exports 2007-8 – 27.47 MMT 2008-9 – 54.71 MMT 2009-10 – 49.50 MMT U.S. Corn Exports 2007-8 – 69.89 MMT 2008-9 – 51.17 MMT 2009-10 – 55.79 MMT U.S. Wheat Exports 2007-8 – 34.36 MMT 2008-9 – 27.64 MMT 2009-10 – 22.45 MMT
  28. 28. © Roach Ag Marketing, Ltd.
  29. 29. © Roach Ag Marketing, Ltd.
  30. 30. © Roach Ag Marketing, Ltd. USDA 2009 World Corn Yields 12/10/09 Non – U.S. 58.9 Bu/Acre World 80.3 Bu/Acre U.S. 162.9 Bu/Acre
  31. 31. © Roach Ag Marketing, Ltd.
  32. 32. © Roach Ag Marketing, Ltd.
  33. 33. © Roach Ag Marketing, Ltd.
  34. 34. © Roach Ag Marketing, Ltd.
  35. 35. © Roach Ag Marketing, Ltd.
  36. 36. © Roach Ag Marketing, Ltd.
  37. 37. © Roach Ag Marketing, Ltd.
  38. 38. © Roach Ag Marketing, Ltd.
  39. 39. © Roach Ag Marketing, Ltd.
  40. 40. © Roach Ag Marketing, Ltd.
  41. 41. © Roach Ag Marketing, Ltd.
  42. 42. © Roach Ag Marketing, Ltd.
  43. 43. © Roach Ag Marketing, Ltd.
  44. 44. © Roach Ag Marketing, Ltd.
  45. 45. © Roach Ag Marketing, Ltd.
  46. 46. © Roach Ag Marketing, Ltd.
  47. 47. © Roach Ag Marketing, Ltd.
  48. 48. © Roach Ag Marketing, Ltd. <ul><li>World coarse grain and U.S. ending stocks ample - but likely to grow. Wheat hurting demand </li></ul><ul><li>U.S. ending stocks likely to increase due to smaller exports and feed offset by + ethanol </li></ul><ul><li>Livestock producers breaking even or better </li></ul><ul><li>We still need a big corn crop every year and should have spring strength in 2010 </li></ul>Corn Situation and Price Outlook
  49. 49. © Roach Ag Marketing, Ltd. How Should I Market My Crops?
  50. 50. © Roach Ag Marketing, Ltd. <ul><li>Focus the majority of sales in the 1 st half of the year </li></ul><ul><li>March through June is usually best </li></ul>Rule # 1
  51. 51. © Roach Ag Marketing, Ltd.
  52. 52. © Roach Ag Marketing, Ltd.
  53. 53. Why Market Grain Aggressively? <ul><li>In the last 21 years, </li></ul><ul><li>Comparing December Corn Futures in </li></ul><ul><li>March–June vs. Oct-Nov </li></ul><ul><li>Dropped Significantly – 15 years </li></ul><ul><li>Drifted Sideways – 3 years </li></ul><ul><li>Increased Significantly – 3 years </li></ul><ul><li>Marketing Ahead is Correct 85% of the Time! </li></ul>
  54. 54. 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
  55. 55. What is it worth? 150 bpa X 0.66 = $100 per acre
  56. 56. © Roach Ag Marketing, Ltd. <ul><li>Sell only when markets are giving us a Roach Ag Sell Signal </li></ul>Rule # 2
  57. 57. <ul><li>December 2007 Corn </li></ul>© Roach Ag Marketing, Ltd. Both Lines Over 75 = Roach Ag Sell Signal
  58. 58. © Roach Ag Marketing, Ltd. Roach Ag Sell & Buy Signals Your Digital Thermometer For Prices
  59. 59. © Roach Ag Marketing, Ltd. Roach Ag Sell Signals When Both Lines Are Above 75 = Sell Signal
  60. 60. © Roach Ag Marketing, Ltd. Roach Ag 2007 Corn Sell Signals 56 Days of Sell Signals ($3.91) and 272 Days Without ($3.71)
  61. 61. © Roach Ag Marketing, Ltd. <ul><li>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 </li></ul>Rule # 3
  62. 62. © Roach Ag Marketing, Ltd. <ul><li>Make sure you have enough on-farm or other owned storage to hold the balance of a crop using your best ever yields </li></ul>Rule # 4
  63. 63. © Roach Ag Marketing, Ltd. <ul><li>Make sure you sell enough in the spring prior to harvest to generate necessary cash-flow from harvest through February </li></ul>Rule # 5
  64. 64. © Roach Ag Marketing, Ltd. <ul><li>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 </li></ul>Rule # 6
  65. 65. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  66. 66. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  67. 67. © Roach Ag Marketing, Ltd.
  68. 68. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  69. 69. © Roach Ag Marketing, Ltd.
  70. 70. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  71. 71. © Roach Ag Marketing, Ltd.
  72. 72. © Roach Ag Marketing, Ltd.
  73. 73. © Roach Ag Marketing, Ltd.
  74. 74. © Roach Ag Marketing, Ltd. December 2009 Corn Sales Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  75. 75. © Roach Ag Marketing, Ltd.
  76. 76. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  77. 77. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  78. 78. © Roach Ag Marketing, Ltd.
  79. 79. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  80. 80. © Roach Ag Marketing, Ltd.
  81. 81. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  82. 82. © Roach Ag Marketing, Ltd.
  83. 83. © Roach Ag Marketing, Ltd.
  84. 84. © Roach Ag Marketing, Ltd.
  85. 85. © Roach Ag Marketing, Ltd. Put Opportunity - Buy Puts on some of the Crop You Do Not Want to Sell on a Cash Contract
  86. 86. © Roach Ag Marketing, Ltd.
  87. 87. What About the Grain You Don’t Want to Sell Ahead? <ul><li>Build Storage to hold increasingly larger yields </li></ul><ul><li>Increased infrastructure will reduce harvest bottlenecks </li></ul><ul><li>Reduce drying and shrink costs </li></ul><ul><li>Capture the futures carry available </li></ul><ul><li>Capture the improvement in basis and competition between bids </li></ul><ul><li>Space out your workload </li></ul><ul><li>Avoid extremely low harvest bids </li></ul><ul><li>Price Risk </li></ul><ul><ul><li>“ If I sell, Prices might go higher.” </li></ul></ul><ul><li>Marketing Risk </li></ul><ul><ul><li>“ If I oversell, I won’t have enough money to buy-back my sales.” </li></ul></ul>
  88. 88. <ul><li>Buy Puts on spring Sell Signals </li></ul><ul><li>Hold them until an August – September Buy Signal </li></ul><ul><li>It takes advantage of the normal price decline </li></ul><ul><li>Cash in and wait until next year </li></ul><ul><li>May also sell Calls if margin calls don’t freak you out – you have to fund Call option loss as it occurs </li></ul><ul><li>Spend about 30 cents on corn and 50 cents on bean </li></ul><ul><li>Frequently able to double your money – but will lose premium if prices don’t go down </li></ul>Cover Unsold Grain With Put Options
  89. 89. Put Option Charts
  90. 91. © Roach Ag Marketing, Ltd. The Information Revolution is Driving the Long Term Demand for Milk, Meat, and Eggs
  91. 92. © Roach Ag Marketing, Ltd. Roach Ag Marketing, Ltd. 7601 N. Federal Hwy Suite 265-B Boca Raton, FL 33487 800-622-7628 [email_address] http://www.roachag.com

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