Grain Update for Wednesday--Jan 28

Spastic Markets!!!

Last week I saw some things in the markets that changed my opinion of price and value, both fundamentally and technically. As I am reporting the change earlier in the week and to customers last week on the phone, we get rain in the forecast for SA and the market gives it up! Rain wins for the week so far...Weather markets are always choppy, and this one is not letting us down; however, in light of the SA situation we have undoubtedly taken production down from the southern hemisphere. This has in my opinion lifted the floor for grain prices for the short term.

The bearish side of this market is without a doubt the US stats and the meat/ milk/ and ethanol markets here in the US. The chicken, cattle, hog and dairymen are under severe pressure in the current environment. I think the pile of corn is growing as we speak and the best ownership may be hay rather than grain! On the bullish side is the ongoing problems in SA and the propensity for countries to build reserves of food. The hog and feed report last week from China was very friendly to the demand picture. I know it may seem nuts, but countries remember last year all too well and are using weakness to buy in and build reserves. This provides a very vaulable bid for grains that was absent on the way down. I am not screaming buy and hold, but I feel that the lows are in. We have done irreversible damage to the SA crop whether it rains or not and our growing season is just around the corner.

The points above have made this market very spastic and two sided. Very choppy trade created by weather, electronic markets, and day traders.

For grain producers, please continue to use strength to make some sales if you haven't already done so. My bias is up for the short term.

For commercial users, use 2-3% down days to buy in corn the next 30-45 days usage.

The weather market is probably not over, the inflation trade continues to churn (watch gold) and our government is intent on reflating our economy at any cost. The US stats are ugly and getting uglier, but I don't think that is where the money is.

Good luck,

Jon Hart