Jul 22, 2014
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The Ted Spread

RSS By: Ted Seifried, AgWeb.com

Ted is the Chief Market Strategist and Vice President in charge of the Zaner Ag Hedge Group and specializes in agricultural hedging employing various strategies using futures, futures spreads, outright options and option combinations. He believes it is paramount to be able to use different strategies to adapt to market conditions. Ted works with large to mid size grain and livestock producers and end users in North, Central and South America.

Are We Due for a Pre-Planting Bounce?

Apr 04, 2013

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.   

It has been a tough week for grains, not that I need to remind anyone.  And, I for one am tired of talking about and hearing about the shocking numbers on the stocks report.  It's time to change the subject.  Unfortunately, we can not totally move on until after next wednesday's Monthly USDA report.  I will have more to say about that next week, but for now I would like to take a little break and talk about what else is going on in the market.  Could we be setting up for a little bit of a spring rally?  We could sure use one.

It seems that with how wrong everyone was about the stocks report last week we kind of overlooked acreage numbers.  Yes, acreage numbers are huge, but at least they were not as huge as some had feared.   Corn and wheat numbers came in right on top of the average trade guess and soybeans were a whopping 1.3 million acres below.  This again puts a lot of pressure on the upcoming growing season.

Speaking of which, we have all noticed the sharp contrast of this year's weather compared to last.  This time last year we were unseasonably warm and all excited about early planting.  Well, we all know what happened with that.  Maybe we should have seen what was coming.  Hind sight is always 20/20, but looking back I feel that more of us should have been concerned.  Now, this year its cold and wet in most areas.  I certainly think that might be a good indication of what is to come in the next few months and I do think it should be causing a different kind of concern for later this summer.  But, we have to get it in the ground first.

CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie

Even if the USDA increases the ending stocks on next Wednesday's report we still have relatively tight ending stocks and there is a lot of pressure on this year's crop.  If it stays cold and wet we could have some planting delays which has the potential to cut into yield potential.  Last year, early planting caused markets to move lower into planting.  This year should be more like most where we have a bit of a rally at least until we are 50-70% planted.  The question is what does the USDA have in store for us on this upcoming report, and can we get a rally even if it is as bearish as everyone is afraid of?  I think so.

Honestly, I don't think next Wednesday's USDA report is going to be as bearish as this recent drop in prices would suggest.  From what the market has done it would seem that we are expecting the full 400 million bushels of corn that came as a surprise on the stocks report to end up on carry over.  I do not see that.  the USDA should take into account the recent price decline and figure that it will awaken some demand.  Also, with the possibility of late planting comes the possibility of a late harvest which would extend the marketing year and add additional weeks of dependence on old crop.

IF there is a spring rally I still think it needs to be sold, for so many reasons that I have been hammering on for months now.  But I am really trying my best to be in a bullish mood, so we can get into that again later.  Feel free to give me a call or shoot me an email it you would like to talk about it, or would like to talk marketing strategy.  There is no better time to make a plan.

Lastly, I would like to thank everyone for all of the calls and emails lately.  Good or bad its great to know you are as passionate as I am.  And, I certainly love to know your reading.

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

May Corn Daily chart:

May Soybeans Daily chart:

May Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have corn near $7.00 and soybeans near $14.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Please check out my Blog at: http://tedseifriedfutures.com/

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

Futures, options and forex trading is speculative in nature and involves substantial risk of loss.  This commentary should be conveyed as a solicitation for entry into derivitives transactions.  All known news and events have already been factored into the price of the underlying commodities discussed.  The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION

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