Sep 30, 2014
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August 2014 Archive for The Grain Report

RSS By: Sean Lusk, AgWeb.com

Market updates from Walsh Trading.

Russia Eager to Sell Wheat: Play It with a Put

Aug 13, 2014

Wheat rallied last week due to fears that the Russian/Ukraine crisis could slow or halt exports.

However both nations are in need of foreign reserves and the short covering rally was short lived. World production estimates continue to climb and US prices are well above foreign competitors. Therefore, without supply disruptions from the Russian/Ukraine region, there seems to be little reason why Chicago wheat futures wouldn’t trade lower in my opinion.

Russia’s decision to ban imports led some to speculate whether or not Russia would also ban wheat exports in an effort to maintain adequate food supplies. However it became clear by last weekend that Russia would need the foreign exchange generated by wheat sales and not further disrupt trade with importing nations that have nothing to do with the sanctions.

Harvest in Europe is well under way and yield estimates for Russia have been rising. Private forecast estimates have the Russian wheat crop coming in at 56 million tones with supply projected at 61.2 million tones, the largest since 2011. It is my opinion that Russia seems eager to sell wheat early this year by discounting prices, and sending excess supply into exports to generate foreign exchange.  The Ukraine is also in desperate need of foreign exchange and as long as Russia does not blockade their ports to destroy shipping infrastructure, it is expected that they will export as much as possible going forward. It is my contention then that supply will outpace demand, and that foreign ports mainly in the Ukraine and Russia will continue to discount milling wheat cheaper laving the U.S. as a third or fourth port for global exports. 

 

SeanAug13.JPG

 

The Trade

Therefore I propose the following trade. To define risk, look at buying the December wheat 530 put for 13 cents, or in cash value $650.00. The risk on the trade is the price paid for the put, plus all commissions and fees.  A close below the trend line on the chart about 5.38 should indicate lower prices going forward in my opinion. 

Webinar

For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 p.m. central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup.  

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS. 

Tim Hannagan's Weekly Grain Report for August 1, 2014

Aug 01, 2014

 This is Tim Hannagan its Friday August 1. Soybeans began the week with its 3 PM Monday crop condition report. Condition came in and 71% good to excellent condition, down 2% from the week prior and the lowest number of the year. With 38% of the crop having pods being set, we can safely say were in the middle of the key yield development time. Current weather forecasters are calling for below normal temperatures to continue as we head deep into the month of August. This past July was the coolest since 1895 setting up August to possibly break the record. Surely we will have talk of an early frost by month end but early on traders will be questioning the cold weather and its ability to produce yields. Crop tours will be anxiously awaited for and watched. Tour results could show fewer pods and smaller beans in the comments. Many believe that the excessive coolness weather will have no effect on the bean crop. That was not the case the last several years as cool autumns have cut yields.  Last Thursday’s Weekly Export Sales Report a demand side report showed massive exports for new crop delivery being sold primarily to China.

 

 We Can Validate the Impact of Demand on the Bean Market once crop size is known, so  don’t put a lot of weight on demand size fundamentals just yet. In the meantime. The last four years this time of year or in the harvest, the market was projecting over 400 million bushel soybean ending stocks. The reality was that ending stocks finished less than 200 million bushels. Technicians are excited about the Beans. We have a double bottom that potentially signals very strong points of support and we haven't visited the double bottom point at 10.56 since Monday last week. Support on November new crop beans is 10.55, a close under and 9.50 is next. A close over our 11.20 resistance sets up 11.50 as next resistance.

For those interested I hold a weekly grain webinar each Thursday at 3pm. It is free for anyone who wants to sign up and link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.

 

Sign Up Now

 

Senior Livestock Analyst Mike Bauer and Senior Technical Analyst Ben DiCostanzo will host their Livestock Oultook webinar thei Wednesday August 6, 2014 at 3:00 PM CDT. If you cannot attend a live, a recording will be sent to your email upon signup.

 

Sign Up Now

 

Tim Hannagan

Grain Analyst

Walsh Trading

thannagan@walshtrading.com

888 - 391 - 7894

312 - 957 - 8108

 

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Walsh Trading, Inc. is registered as an Independent Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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