The Ted Spread
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.
New Crop Corn and Soybeans Breakout!
Jun 07, 2012
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY 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.
New Crop Corn and Soybeans Breakout!
Despite another disappointing export sales report row crops were able post a strong up day and break out above resistance levels. The weather forecast this morning was a little drier in the midwest for the next two weeks adding to concern that we could be moving into a hot a dry period that will put stress on crops. In the near term we are looking at hot temps this weekend followed by a chance of rain Monday into Tuesday. However this rain event projected for early next week has started to look questionable as far as coverage and amounts of precip. On top of the bullish weather outlook, last night the Chinese Government lowered interest rates to stimulate their economy. This put pressure on the US dollar as well as gave grain traders hope for stronger export demand going forward.
In the last two days we have seen the EU and China move to stimulate economic growth. This has pulled the US dollar off of its highs and planted the seed for the FED to follow suit with a stimulus package of their own. However, when Ben Bernake spoke mid day today he did not hint toward the possibility of a third round of quantitative easing. The Feds stance at this point may end up being more of a wait and see attitude looking to see if further stimulus in the US would be necessary and/or helpful for the global economy or if in fact stimulus in the EU and China will trickle back into the US economy as well.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
I think it is likely that the Fed does not take action at this time under the premise that another round of quantitative easing would have little effect and therefore would cost more (in the form of inflationary pressure) then it would be worth in short term stimulus. That being said, I also think that the actions taken by the EU were too little to have any major effect and the issues in the EU will persist. If this is the case we could see the US Dollar recover to make new highs.
Certainly weather is going to be the biggest determining factor in the overall direction of the corn and soybeans. If weather forecasts continue to reflect hot and dry conditions it is possible that higher new crop prices will follow. However, if the weather forecasts move to a more normal scenario then this may be a fantastic opportunity to market new crop corn and soybeans. The momentum at the moment is to the upside and it is a good idea to wait until there are signs that this rally has run its course, but with normal weather and the potential for a strong dollar there is significant risk to the downside this year.
With a hot and dry weekend on tap it is likely that the corn and soybeans will stay strong until the rain hits the ground, but keep in mind we have a USDA WASDE report on Tuesday and we will be taking a close look at the Monday afternoon crop progress report to see if there was any stress on crops from the hot temps. So a very busy early next week will go a long way in determining market direction.
When Does Weather Matter: http://www.zaner.com/offers/?page=6&ap=tseifrie
See December Corn Daily chart:
See November Soybeans Daily chart:
This means that speculators should be looking for opportunities and producers need to make sure they lock up prices that makes sense for their bottom line. 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 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.
Ted Seifried (312) 277-0113 or email@example.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?rid=Seifried
Futures, options and forex trading is speculative in nature and involves substantial risk of loss. 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