Jul 28, 2014
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April 2014 Archive for 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.

What are Old Crop - New Crop Corn Spreads Telling Us?

Apr 29, 2014

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.     

Corn prices have been strong to end the month of April.  Old crop corn is finding strength from stronger then expected demand and a tighter US balance sheet.  New crop corn is higher based on delayed planting and the potential loss of more acres.  While new crop and old crop corn are certainly related they do have different factors influencing prices.  So, what does the relationship between the new crop and old crop corn tell us?  

In grains we refer to last years crop as old crop.  This is the grain we grew last year and what we are currently using.  New crop is the next crop that we expect to grow.  This is the grain that we will be working hard to produce and that will be used after the harvest.  There is certainly a lot of overlap in fundamentals between any particular grain's old crop and new crop.  For the most part we assume demand will be constant unless a big fluctuation in prices were to occur.  We know that there will be some old crop that we carry over into the new crop marketing season.  And, how much or how little grain that will be carried over sometimes dictated how closely related old crop and new crop prices will be.  What we do not know is supply.  Grain production can vary from one year to the next depending on how many acres are planted and how good or bad the weather is during the growing season.  

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

Under normal market conditions there is usually a premium to the new crop contracts because we do not know how the next growing season will go.  This production uncertainty keeps new crop prices higher.  In a bear market this can be exaggerated as old crop prices can go lower to try to spur demand, but in a bull market this relationship can flip.  A bull market generally means that demand is strong relative to supply.  In this scenario many times old crop prices will be higher then new crop prices.  The idea is that the balance sheet is tight now but could be better next year if production is good.  When old crop prices are higher then new crop prices this is generally a good indication of a bull market.  Because of this relationship old crop and new crop prices do tend to go in the same direction but that direction is usually lead by old crop.  

So, what is the old crop - new crop relationship in corn telling us this year?  Currently you have a 9 cent premium to the July (old crop) over the December (new crop).  This is a rather small premium to the old crop for a bull market.  For example July soybeans are almost $2.70 cents over the November contract.  And, the May corn contract is about to go off the board with a 3 1/2 cent premium over November.  This is a rather interesting relationship considering that corn has now rallied a dollar off the lows.  Now, back in January when corn was on the lows the new crop December contract held an 18 cent premium over July.  This was a good indication of a bear market.   

With July now holding a 9 cent premium over December it means that the July contract has rallied 27 cents more then the December during this rally off of lows.  This is what we would expect from a market in an uptrend, but it is not overly impressive indicator of a bull market.  We are not seeing the strong premium in old crop over new crop like we do in the soybeans.  This may be suggesting that corn is in the process of a correction in a longer term bear market.  

Now, new crop corn has had it's own reasons to rally as well and at some points has been the leader of the corn complex.  The old crop balance sheet has gotten tighter but is in now way a tight situation.  So, old crop corn has not had to rally sharply to price ration demand like old crop soybeans have.  In the mean time new crop corn planting intentions are 10% lower year over year which could be suggesting we will produce less corn next year.  On top of that planting progress is 9% behind the 5-year average which is causing concerns that we may not get all of the intended corn acreage planted in time which means more acres may be lost and later planted corn may not produce as good of yields.  So, new crop corn has had reasons to rally also.  But, if we really are worried that new crop corn production may fall short then we should be putting a premium on what old crop corn we have left.  The idea would be to price ration demand so that we could take as much corn into next year as possible.  So, if corn prices were to continue to push higher we would expect old crop corn to begin to rally further and faster then old crop corn.  

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up here: http://www.zaner.com/offers/?page=17  

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.     

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. 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

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.

What if Corn Lost Another Million Acres?

Apr 24, 2014

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.     

With late planting concerns hitting a fever pitch this week should the corn market be concerned about loosing more acreage?  And, more importantly what would happen if we couldn't get a million of the intended corn acres planted?  Lets take a look at the potential impact.  

As of Monday April 21st corn plantings were 6% complete compared to 14% as the five-year average.  However, we are slightly ahead of the record slow pace of last year when we were just at 4% planted at this point and we still got 95.4 million acres planted.  It sure was a bitterly cold winter season (the term polar vortex comes to mind) and we have been slow to warm up.  Soil temps have been slow to get to adequate planting temps and in some areas frost line is still a concern.  The two week forecast is also cooler and wetter then ideal which is adding to the concern.  

In the last 20 years acreage numbers change by +/- 1,127 million acres on average from prospective planting to actual plantings.  Now, I would think it is very likely that the corn crop gets planted, and we have seen in recent years that late planted corn does not necessarily mean a big hit on yield potential.  But, with corn acreage already dropping 4% to the lowest level since 2010 what would happen if we lost another million acres to late planting?  

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

At the beginning of April we put out our first new crop production estimate at 13.933 billion bushels on 92.3 million acres  with a 164.5 bushel an acre yield.  In this scenario we were increasing planted acreage by .5 million acres.  But, if we go the other way with that and take a million acres off our planted acreage estimate what would that do to our production number?  With 90.7 million acres and an assumed harvested acreage number of 83.7 million acres with our yield estimate of 164.5 it would give us corn production of 13.769 billion bushels compared to our previous estimate of 13.933 billion bushels and last years production of 13.925 billion bushels.  This would be roughly a 165 million bushel reduction in production from our previous estimate.  

Keep in mind that we are using a conservative yield estimate compared to the USDA's trendline yield of 165.6.  We do feel that even with late planted corn we would have a good chance at hitting our yield target yield because of the nature in the shift of acreage.  The largest reduction in corn acreage is coming mostly from the lower yielding areas.  For example, the largest shift from corn to soybean acreage is in North Dakota.  So, with less planted acreage in the lesser yielding areas we do feel it would be easier to hit or get near trendline yields this year given normal weather.  

However, what would happen if poor weather during the growing season were to start to cut into yield potential?  For example, lets use the same acreage numbers but with a yield of 160 (a 3.5% reduction from the USDA trendline yield).  This would give us a production number of 13.392.  This would be a 540 million bushel reduction in production from our previous estimate and could give us a tighter balance sheet then the current marketing year.  It is easy to see that much more of a reduction in yield would quickly cut production and put the balance sheet in a tight situation.  This could cause a need for price rationing.  

So, from this exercise we see that losing some corn acres due to late planting is not the end of the world but it certainly puts more pressure on good yields.  With lower acreage it will be very important this year to hit strong yield at or near the USDA trendline.  This could make for a very sensitive and very volatile weather market going forward.  Currently longer term forecast are looking at a good chance of a moderate El Nino weather pattern for the growing season which would be good for crops.  But any hint of weather issues this year might be met with significant concern and possibly higher prices.  On the other hand, if weather is near ideal we could still have a record crop this year.  

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up here: http://www.zaner.com/offers/?page=17  

I am happy be a guest analyst on US Farm Report this week, so tune in if you get a chance!  

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.     

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. 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

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.

Will Fund Buying Run Soybeans to New Highs?

Apr 22, 2014

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.     

Soybeans have been under pressure to start the week after scoring new highs late last week.  So far this week funds have been net sellers, trimming their massive long position.  Will this trend continue, or are they getting ready to come back in a big way?  

The bull market was in full swing last week as July soybeans set new highs on Thursday in front of the three day holiday weekend.  This strength was fueled by a March NOPA crush number that was almost 8 million bushels higher then expectations and set a new record for March crush.  At the end of last week it seemed as though the market was determined to factor in a 115-120 million bushel old crop soybean carryover.  However, after the long weekend it seems as if the market mentality has changed for the moment as the trade's focus has shifted to the possibility of China defaulting on 1.2 million metric tons of US and South American soybean sales, South American cargoes being switched to the US, and the possibility of more soybean acreage.  

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

The talk in soybeans the last few days has centered around Chinese buyers trying to cancel open Brazilian contracts and that some of theses sales may get resold to the US.  News wires reported that 2 cargoes of Brazilian soybeans and 2 cargoes of Argentinean soymeal are on the way to the US.  Talk that China may soon sell state owned soybean reserves has also added pressure.  For new crop soybeans, news that corn plantings were only 6% complete compared to 14% as the five-year average has sparked talk that if farmers can not get corn planted in time there may be even more soybean acreage then the already record figure set by the USDA Prospective Plantings report.  

In the midst of the bearish talk surrounding the soybean market the large speculators of funds have stepped aside and have been net sellers.  This has translated to a 50 cent sell off from last Thursday's highs.  However, this has now brought soybeans back to trend line support and could now start to draw attention from the technical traders looking to buy a pull back in an otherwise bull market.  Large speculators could very well be waiting in the wings to aggressively buy old crop soybean contracts one again.  It will be very interesting to see if and how strongly funds might come back at or near current price levels.  So far there is no strong technical topping formation in soybeans and technical trades could look to defend long positions at this point.  However, if soybeans can not hold current levels a bigger correction or fund liquidation event could follow.  For now we are waiting to sell old crop soybeans to see what the funds do at key support levels, and we are thinking they could come in as bigger buyers again soon.  

New crop soybeans could be a different story.  With projected record world soybean stocks and projected record US planted acreage new crop soybeans prices could be at or approaching highs.  Certainly we still have a growing season to get through and a major weather issue could keep soybean stocks tight, but given normal weather soybean stocks could be near the highest levels in recent years by the time the US gets into harvest in the fall.  Now might be a good time to look at pricing strategies for new crop production.  

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up here: http://www.zaner.com/offers/?page=17  

I am happy be a guest analyst on US Farm Report this week, so tune in if you get a chance!  (or if your like me, record it and watch it later!)

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.     

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. 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

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.

Should Corn be Fighting Harder for Acres?

Apr 17, 2014

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.     

According to the USDA's Prospective Planting report they expect corn acreage to drop 4% to 91.7 million acres and to the lowest level since 2010.  At the same time the USDA expects soybean acreage up 6% to a record high 81.5 million acres.  Planting intentions are up or unchanged in all States except Missouri and Oklahoma.  However, with the USDA estimating a 2.339 billion bushel increase in corn demand from last year to this year and a projection for a record world carry over for soybeans this year should corn prices be making more of a push to entice producers to plant more acres?  

Since the USDA released their Prospective Plantings report on March 31st December corn is up 9 1/2 cents while November soybeans are up 52 cents.  So, if anything soybeans may be adding to the USDA's record plantings estimate and this could be coming at the expense of corn.  Worse yet, price may not be the biggest factor in determining acreage this year.  Weather will have a big say in the acreage mix.  Wet and cold weather could delay plantings and this could mean that producers may miss the window of opportunity to get all of their intended corn acreage planted and chose to plant more soybeans instead.  Also, a historically weak corn basis in the Northern Midwest is pushing producers toward soybeans regardless of price.  North Dakota currently has a negative 85 cent basis for corn due to rail competition from Bakken oil and is also not surprisingly where the USDA sees the biggest shift in acreage from corn to soybeans - almost 1 million acres.  

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

So, while price may not be the biggest determining factor in the acreage mix in some areas shouldn't corn prices be strengthening in relation to soybeans to try to buy acres where it can?  This would certainly make sense.  Corn demand has come roaring back to life since we saw record prices in 2012 and with lower acreage this year it may take a near perfect growing season to keep up with demand.  Soybeans on the other hand have a much different story.  There are a lot of soybeans in the world today after a monster South American crop.  And, record acreage here in the US could translate in to  one of the biggest soybean stocks in years if we have anywhere near normal weather this growing season.  On top of that Chinese demand seems to be slowing as of late and the PED virus in hogs does not seem to be going away.  

In the last few years global soybean demand has been growing while global production has had issues.  In the mean time corn demand has been fairly elastic relative to price fluctuations and this year corn production has rebounded significantly.  So the soybean market has been on a mission to increase global production.  However, markets have a tendency to over achieve its goals and may very well be in the process of "buying" more soybean production then needed.  If record acreage does get planted in the US (which looks likely) and we do have an ok growing season there could be a significant over supply in soybeans next year and prices could need to fall to buy more demand.  On the other hand, the corn market has already grown it's demand base with lower prices and a near perfect growing season will be needed to satisfy demand.  So, if you are making the switch to plant more soybeans this year it may be very important to look at new crop hedging strategies to lock in current price levels.  

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up here: http://www.zaner.com/offers/?page=17  

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.     

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. 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

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.

The Fundamental Difference in Soybeans

Apr 15, 2014

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.     

There is a vast difference between old crop and new crop soybean fundamentals.  With a record pace of exports and strong domestic usage old crop soybeans have a bullish story.  However, with a projected record world carry over, projected record US acreage and a forecast for a moderate El Nino growing season the new crop soybean situation may be more bearish then what we have seen in years.  So far the bullish old crop soybean situation has taken center stage but as we get closer to the USDA's first estimate of a new crop balance sheet and planting the US soybean crop will the new crop story get more attention?  

The old crop soybean situation has been a bullish factor for the soybean complex as well as for the grain complex as a whole.  Export sales were much stronger then expected and have set a record pace.  It seems that global end users may have been double booking their needs buying both US and South American soybeans with the idea that if South America were to have issues getting their soybean crop to the ports and shipped out like they have in years past they would already have US soybeans booked and would not have to pay up on a South American delay rally, and if not the plan was to cancel US shipments and take the South American beans.  However when South America was able to get soybeans moved into position for export and was able to start making shipments the US would not allow cancellations, possibly related to China rejecting US corn cargoes due to an unapproved GMO strain.  

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

In the end the US export sales have been shipping out and the record pace of sales and shipments along with strong domestic demand has left us with a very tight soybean balance sheet and a need to price ration demand.  Since February soybean prices have rallied sharply but while export sales have fallen off in recent weeks the March NOPA crush suggests that domestic demand remains strong.  The NOPA crush number is a bit of a lagging indicator, but could be suggesting that more price rationing is needed to avoid running out of soybeans this year.  Higher prices could also draw more South American imports, and it is possible that the higher crush number is a reflection of bigger South American imports as well.  

The new crop soybean situation is almost the opposite of the old crop situation.  Higher soybean prices and lower corn prices along with weak corn basis in the North due to logistical issues has encouraged a big shift to soybean acres this year.  At the current USDA projection we would be looking at a record planted acreage number for soybeans.  Given a normal growing season this could translate into one of the largest stocks numbers we have seen in recent years.  And, although longer term weather forecasts can be a bit of a crap shoot they are currently calling for a very favorable El Nino weather pattern during the growing season.  On top of that global demand seems to be slowing down at higher pries and with a huge South American crop in the process of being harvested the world stocks number is projected to be at a record high.  This might mean that the world will be flush with soybeans next year.  Certainly we still have a growing season to get through but, if we don't have a major weather issue we may see big soybean stocks next year.  

As we get ready to plant soybeans and as we start to think about what the USDA might estimate for next years balance sheet the market's focus may begin to shift from the bullish old crop fundamentals to the more bearish new crop fundamentals.  This will not happen over night, but April or May is typically when this starts to happen.  Now might a good time to take a look at new crop soybean prices and lock in some prices while the focus is still solidly on the bullish old crop fundamentals.  

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up here: http://www.zaner.com/offers/?page=17  

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.     

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. 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

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.

What is the Real Deal on US Soybean Imports?

Apr 10, 2014

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.     

On the April 9th USDA WASDE report the USDA finally increased export demand to reflect the record pace of soybean export sales and shipments.  The 50 million bushel increase in soybean exports was partially offset by a 30 million bushel increase in imports as well as slight reductions in crush and residual.  With the USDA now estimating 65 million bushels in imports this would be a record amount of soybeans imported in to the US.  But how accurate is the USDA's estimate?  

In the notes of the Executive Summary of the USDA's April WASDE report the USDA stated that they were increasing imports to a record 65 million bushels based on trade reported through February and the expectation of shipments from South America in the second half of the year...  First of all, we would love to see what the trade reported through February was as well as how and by whom it was reported.  As it stands the USDA does not have a reporting system in place to account for soybean exports.  So how are they getting these numbers?  It would be very helpful to know and would add more transparency to their reporting methods.  The last few years and this year in particular highlight the need for an import reporting system.  It is rather likely that soybean imports to the US will continue to grow in coming years and it would be nice to know that the USDA is not just pulling numbers out of thin air or just using whatever plugs into their balance sheets.  And, if they do have some sort of reporting system from which they got import data through February why are they not making this public.  If I were a betting man I would say if that had something we would have seen it.  Saying it is there doesn't mean it's there, but this seems to be a concept lost on the USDA.  

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

Secondly, if there were measurable imports coming into the US through February then where were they coming from?  On a good year some areas in Brazil are able to get out into fields and start harvesting in early February, most areas are still weeks if not months away and Argentina usually doesn't get going until the beginning of April.  So, are we talking old crop South American soybeans here?  If this is the case it would stand to reason that there will be or maybe already has been a lot more where that came from (literally) as new crop supplies become available.  Another thing is that soybeans hadn't traded above $13.25 until the second half of February.  If South America was selling us old crop soybeans at $13.00 what do you think they are thinking at $15.00 just as they are sitting on a pile (again literally) of newly harvested stock?  

The question is - with a lack of USDA reporting system for imports who would be telling us what is coming in?  It would have to be commercials but here is where the problem lies.  Some late season hot and dry conditions had the soybean market at a steep inverse going into harvest.  Spreads were asking producers to sell soybeans off the combine and store corn and to a large extent this is what happened.  So, the majority of last year's soybean crop lies in the hands of the commercials at this point.  So, if they own the soybeans would they want to divulge news that would very likely put pressure on prices?  Probably not.  At this point commercials could be buying South American soybeans, shipping them to the US and selling them at higher prices with the market having very little knowledge of this.  In fact there have been many rumors of large soybean imports and even in some cases shipments of South American soybeans coming into the US only to turn around and get sent to China.  But again, without any sort of reporting system we have no way of knowing what is true and what is not.  The March 31st stocks report was likely too early to reflect much in the way of imports, but the June 31st quarterly grain stocks report could have a surprise waiting.  

Ultimately, we may never know how many soybeans were imported in the US this year.  The USDA should do something to address this for years to come.  The interesting thing is that if we are looking at a tighter soybean carry over then last year why is basis not reflecting this?  Either way, this may not really matter at the moment anyway.  For now funds have found a bull market to exploit and will likely continue to do so until they decide to get out.  This could continue to push soybean prices higher despite what many, if not most, analysts see as a bearish fundamental backdrop.  And who knows what the funds have planned.  In the long run this could be bad for markets because demand may suffer at higher prices and this could be setting markets up for a sharp drop at some point in the future, but for now the name of the game is follow the money flow.  

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up here: http://www.zaner.com/offers/?page=17  

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.     

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. 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

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.

What is Our 2014 Corn Production Potential?

Apr 03, 2014

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.     

Now that the USDA has given us a Prospective Plantings number to work with we wanted to look at a couple scenarios for 2014 corn production and give our early estimate.  The two main factors that make up a production estimate are acres and yield.  Acres may change between now and the USDA's Planted acreage report and weather will have a hand in determining this.  Yield will certainly be dependent on weather as it is every year, however it is important to note that in the last 10 years the yearly deviation from trend line yield has been less than in years past.  

To begin with, acreage numbers change on average by +/- 1.127 million acres from Prospective Plantings to Planted Acreage.  This year weather will have a big say in which way this goes.  After a brutally cold winter in most of the growing area the concern will now be how quickly we can warm up and dry down enough to get planters rolling in the fields.  If there were to be major planting delays again this year as there was last year, producers may loose the window of opportunity to get corn planted and switch acres to soybeans.  On the other hand, if planting goes quickly and smoothly corn could steal some acres back from soybeans.  Also, many analysts were looking for an over all increase of corn, wheat and soybean acreage this year in the neighborhood of 2-3 million acres while the USDA is only looking for about a 1 million acre increase in the big three.  So, some more acreage may be found by the time we see a final Planted Acreage number.  

Yield is always dependent on the weather.  Corn needs moisture and heat units to produce good yields, that has not changed.  However, what has changed in recent history is that, due to genetics, corn crops are much more resilient to stress factors then in years past and yield potentials also continue to rise.  In fact these genetics are good enough to have guys planting lots of acres in areas that were not big corn producers 5-10 years ago.  The net result of ever improving seed genetics is that corn yields do not vary as wildly as they did prior to 2000.  So, it will take a major weather event like in 2012 to knock much off or add much to trend line yields.  

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

A quick note on harvested acreage and trend line yield.  Generally harvested acreage is between 90-92% of planted acreage.  In recent years the trend has been higher percentages.  So, if the USDA's Prospective Plantings number of 91.5 million acres were to come to light we would think we would see 84 million harvested acres.  Trend line yield is set by a formula and is presented at the USDA baseline conference in February.  This year they are using 165.6 bushels per acre.  At face value this seemed high to us, but after seeing the breakdown of the state by state Prospective Plantings report it makes a little more sense.  

As far as yield is concerned this year, we did initially think that it would take a better then average growing season to achieve 165.6 bu/acre.  However, as we dig into the USDA's Prospective Plantings report we see that a good amount of the reduction in acreage this year will be coming from areas that are not typically national leaders in average yield.  For example, the largest corn acreage reduction from year to year is in North Dakota while the largest increase from year to year is in Iowa.  So, to an extent it seems that even with smaller acreage this year corn acres are concentrated in higher yielding states and this might justify a higher national yield given normal weather.  

When trying to determine corn production there are two moving parts, both influenced by weather.  Lower acreage puts more pressure on a good growing season.  Given the USDA's Prospective Plantings number and their trend line yield 2014 corn production would be roughly 13.9 billion bushels depending on harvested acreage.  If adverse planting weather would cause corn acreage to fall to 90 million acres (1.5 million acre reduction) and weather was normal for the growing season production could fall to 13.681 billion bushels.  If planting were to go smoothly and corn were to add 2 million acres, and summer weather was normal production could jump to 14.213 billion bushels.  Or, if planting were to go as expected but drought conditions were to return this growing season and shave 8% off of trend line yield production could fall to 12.797 billion bushels.  And so on...

On to our 2014 corn production estimate.  We feel we will have a slow start but otherwise normal planting season.  We do not think there will be a major shift in acreage back to corn from soybeans or wheat however we do feel that overall acreage could increase with corn benefitting the most.  So, we are using 92.3 million for our working planted acreage estimate (increase of .8 million over the USDA) and 84.7 million acres for our working harvested acreage estimate.  We also think that with long term forecasts hinting toward the possibility of a summer El Nino event we feel that yields could be near or even slightly above the USDA's trend line yield of 165.6.  However for now we are going to lean more on the conservative end at a 164.5 bu/acre national yield.  Using this acreage and yield combo we would come up with 13.933 billion bushel production.  This would compare with 13.925 billion bushels produced in 2013.  

So, with fewer acres this year it puts significant pressure on yield.  Good weather will be needed for planting and throughout the growing season to produce a crop near 2013 proportions.  However, in part due to where corn acreage has declined it is certainly possible to produce a bigger crop in 2014 then 2013 if weather is normal or better.  We expect markets to be very sensitive to weather this year and that weather market could be starting early if planting delays start to build.

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up here: http://www.zaner.com/offers/?page=17  

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.     

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. 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

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.

Will Higher Prices Find More Corn Acres?

Apr 01, 2014

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.     

On Monday the USDA released their 2014 Prospective Plantings report and corn acres came in 1 million acres below trade expectations at 91.7 million acres.  This would be down 4% from last year and would represent the lowest planted acreage number for corn since 2010.  But, as prices rally in the wake of this report will corn find more acreage at higher prices?  

According to the USDA the acreage numbers estimated in the Prospective Plantings report are based on surveys conducted during the first two weeks in March from a sample of around 84,000 farm operators. According to their findings corn acreage will fall in many of the key corn producing states.  The largest reduction will come from North Dakota with almost a 1 million acre decline.  This is likely a reflection of the weakest basis and cash prices in the country as rail transport is being consumed by oil coming from the Bakken.  

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

December corn prices have now rallied 30 cents since the release of the report and could be making a push to buy back some acreage.  In the last 20 years the final planted acreage number has come in higher in 8 years and lower in 12.  The average difference between planting intentions and planted acreage is 8.884 million acres and the average difference between intentions and final acreage is 1.127 million acres.  Is it possible that corn will end up with higher planted acreage?  

Higher corn prices could sway some producers to switch their intentions before planting and "buy" some corn acres.  However the biggest factor may be the weather.  Last year a cold and wet spring caused major planting delays and pushed some producers beyond the comfortable time frame to plant corn.  So far this spring it has been more of the same with temperatures well below normal after a very cold winter.  So, weather may keep producers from adding to corn acres or could even mean more corn acres get switched to soybeans.  Weather will have a very important say in the final planted acreage mix.  

But, if spring weather does improve and producers are able to get into fields and start planting corn in a timely fashion acreage could increase.  First of all, most analysts were looking for a 2-3 million acre increase in corn, wheat and soybeans combined.  The prospective plantings report suggest slightly under a million acre increase.  It is thought that there are more acres coming out of CRP and PP that could end up going mostly to corn if weather allows.  Also, soybeans are expected to get a record amount of acres and while current soybean prices support this idea we are also expecting to see record world soybean stocks this year.  If the projections far a record world stocks number are true then there may be an over supply of soybeans in the world if US producers plant the projected 81.5 million acres and we have a normal to better then normal growing season.  Producers may begin to see this and look to switch to corn acres if prices and weather agree.  

So, corn prices may need to go higher in the short - mid term to entice producers to add to corn acreage.  And higher corn prices may very well find more corn acres.  However, weather may pose a major obstacle to this.  If weather remains threatening corn prices could continue to rally on concerns about tight stocks situation given the smaller acreage estimate...  We will get into production estimates based on acreage projections in weeks to come, but weather is going to be a big factor this year with smaller acreage and it looks like the weather market may be starting early.  

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up here: http://www.zaner.com/offers/?page=17  

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.     

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. 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

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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