Jul 25, 2014
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July 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.

Look at those Grain Exports!

Jul 24, 2014

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.       

For almost two weeks now we have been seeing export sales announcements coming through almost every morning.  However, this grain export business has not done much to support markets so far but it could be a positive sign for things to come.  The question now is - will this increase in export business continue or was this just a short term deal?  

For the last two weeks it has seemed like every morning it was not a question of if but a question of when I would get an email from the USDA FAS announcing new export sales.  Global buyer buyers have been buying corn and especially soybeans after the recent, sharp drop in prices.  This came to a head on this weeks export sales report which confirmed very strong sales of corn and soybeans.  Corn sales of almost 45 million bushels came in almost double the high end of trade guesses and soybean sales of over 90 million bushels were almost twice the market expectations as well.  This strong export sales business is a bright spot in an otherwise dreary market climate lately.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20  

The question now is whether this strong up tick in export sales will continue or if this was just a flash in the pan.  First of all, prices may need to stay low to continue to encourage sales.  Secondly, there is the possibility that global buyers are looking at the recent break in prices as an opportunity to make purchases on a percentage of their needs before key August weather just in case there were a problem.  Some of these purchases may be a weather hedge, if you will, for the remainder of the growing season.  So, it will be very interesting to see what happens in the next few weeks.  

At this point we are ahead of the export sales pace from last year at this time.  If this pace keeps up the USDA could be too low on their current export forecast.  And, if prices do continue to go lower exports could get even stronger.  The bottom line is that it is positive to see global grain buyers step up to the plate at current prices rather then wait for the market to continue to come down.  

For now weather will likely continue to be the key market mover.  As many analysts are now throwing around super sized yield forecasts the markets focus is squarely on production and how big crops could be.  In my experience things are rarely as good as they seem and almost never as bad as they seem.   

Sign up for our Morning Ag Hedge newsletter!  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.     

December Corn Daily chart:

November Soybeans Daily chart:

December 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 Happens Next in the Ukraine?

Jul 17, 2014

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.       

Today, news broke that a Malaysian Airlines 777 was shot down over eastern Ukraine where pro-Russian separatists and the Ukrainian government have been doing battle.  295 lives were lost, 23 of them were US Citizens.  While I certainly do not proclaim to be an expert on Russia or the Ukraine, and bullets and missiles are a long way away from corn kernels and bean pods I find myself trying to predict what comes next and how it affects the grains markets.   

What exactly happened is not very clear.  In the aftermath of this tragedy both the pro-Russian separatists and the Ukrainian government are trading blame for the incident.  What we do know is that a plane full of innocent people was shot out of the sky at 33,000 feet (just over 6 miles high) by a BUK launched surface to air missile near the Ukrainian/Russian boarder.  What is clear is that this situation has come to a head and that when things happen of this nature there will be a reaction.  The question is what and by whom.  What happens next will be of utmost importance, not only for grains markets but for the geopolitical climate.  

This has an impact on grain markets in a few ways, but the most obvious way is Russian and Ukrainian grain production and exports.  Combined Russia and the Ukraine account for 74 million metric tons or 10.5% of the world's wheat production and 28.5 million metric tons or 19% of global wheat exports according the USDA's current estimates for 2014/2015.  The Ukraine also accounts for 27 MMT or about 3% of the world's corn production and 16 MMT or 14% of global exports.  The concern is that if this situation continues to escalate that this export capacity would be significantly reduced or lost and the rest of the world would have to look elsewhere to fill these needs.  Some of this wheat business and a good portion of the corn business could fall to the US and cut into ending stocks for next year.  So, how likely is this?  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17  

Again, I am not an expert in these matters but it would seem to me that there are two possible outcomes going forward.  The first, and I believe less likely would be that the US steps in to help the Ukraine fight the pro-Russian separatists and Russia steps in to support the rebels.  This could mean the resumption of the cold war and could mean that Ukrainian and Russian grains are lost to the rest of the world.  The other possibility would be for this thing to be solved politically and peacefully (at least from this point forward).  This could happen in a few ways, but the most logical way would be for Russia to intervene at this point and lead the charge to disband the pro-Russian rebels.  

To this point Russian President Vladimir Putin has politically positioned Russia to look like he is a peace keeper in this engagement.  The annexing of Crimea was justified by a majority population of ethnic Russians and was said to be the best solution to keeping peace.  But, now that innocent international blood has been spilled this is an opportunity for Russia and actually do what they say they are trying to do - make peace.  The ball is in Putin's court to step in and stop the pro-Russian separatists from committing any more violence, or at the very least to allow it to happen.  If this is not the case things could escalate.  

My gut feeling is that this situation will be politically resolved and that it will end up having very little if any impact on the global grain market.  However, I am not sure if this is really the path of least resistance or it is just what I hope to see happen.  Either way this situation has reached its climax and what happens now may have a significant impact on grains markets as well as the geopolitical climate.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20  

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.     

December Corn Daily chart:

November Soybeans Daily chart:

December 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.

Has Corn Gone Too Far?

Jul 15, 2014

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.       

December corn set new contract lows today after crop conditions hit the highest level in 20 years.  At 76% Good to Excellent this is the highest rated corn crop at this time of year since 1994 when corn was 86% good to excellent.  1994 set a new record yield by a long shot, but should we already expect the same this year?  

Corn has been under significant pressure in the last 2 1/2 months with December corn falling over $1.30 off highs.  Much of this pressure has been the product of very good weather conditions and a highly rated corn crop.  Other factors include declining soybean and wheat prices as well as larger then expected old crop stocks.  There as been very little news for corn to get excited about in the last two months.  

At this point however, not only is corn very oversold but we may have taken too much weather premium out of the market.  With the Relative Strength Index (RSI) at about 19% corn is in an extreme oversold condition.  This does not necessarily mean corn will bounce, but it could be suggesting that selling pressure could ease a little in the short term at least from the technical traders.  At the same time the market has taken out any weather premium and while the corn crop certainly looks good there could still be weather issues that could hurt yield potential.  With less planted acreage this year corn needs to at least see record yield to maintain a comfortable balance sheet.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20

The other question is when do we begin to see more value buying in corn.  With futures prices near 4 year lows it would seem likely that global and domestic end-users would be looking to fill some corn needs at lower prices.  The issue may be that China seems to have all the corn they need for now and the general perception is that corn is still going lower.  It may take a 10 cent rally to motivate buyers after such a large change in prices.  After all, why would anyone buy if there is no fear of higher prices?   

When all is said and done we certainly could end up with a new record national average corn yield and it may be by a long shot.  But, there is still months of weather to get through first before we should assume that.  An early frost could sure change the current USDA balance sheet. 

Farmer selling could be a limiting factor on a rally as many producers have not gotten enough corn sold at higher prices and are looking for that bounce to sell.  And, weather forecast still look very good.  But, as we approach 4 year lows I wonder if corn can find some support and build some weather premium back into the market at least until we know for sure what we have.

Sign up for our Morning Ag Hedge newsletter!  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.     

December Corn Daily chart:

November Soybeans Daily chart:

December 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.

Dissecting the USDA's Old Crop Soybean Balance Sheet

Jul 11, 2014

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.       

The USDA managed to surprise the trade again with the July World Agricultural Supply and Demand Estimates (WASDE) report.  In particular the old crop soybean balance sheet took the market by surprise.  As the dust begins to settle lets take a look at the breakdown of the old crop soybean balance sheet.  

The old crop soybean balance sheet was one of the biggest surprises of the report.  There had been a lot of burning questions for months now about how the USDA was going to handle the old crop soybean balance sheet.  For one, exports had been running well above the pace of the USDA's projections.  The crush was also running higher then the USDA's projections and with so many planted acres soybeans for seed should have been higher as well.  It could be argued that the import number was also too high.  

All of this suggests that the already tight USDA ending stocks estimate of 125 million bushels could in fact be much tighter.  However, at the same time the cash market was not reflecting this perceived tight situation.  Also, the June 30th grain stocks report was suggesting more soybean stocks as well.  

The USDA addressed all of these old crop soybean issues on this July report.  They decreased soybean imports 5 million bushels to a more believable 85 million bushels.  They increased crush demand 25 million bushels which puts us more in line with reality.  And, they increased exports 20 million bushels to 1.62 billion bushels which is still behind the current commitments number but could end up being very close to the actual shipments number.  The USDA also increased soybeans used for seed by 4 million bushels.  In all this represents a 54 million bushel decrease in soybean stocks.  So this means that soybean stocks dropped to 71 million bushels, an historically low ending stocks number right?  Well....  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Soybeans: http://www.zaner.com/offers/index.asp?page=21

It was fairly obvious that the USDA could not decrease demand even though the soybean stocks were higher then expected, so they were left with a dilemma.  How to show more soybean stocks while at the same time increasing the demand side of the equation.  In reality this seems mathematically impossible.  Well, problem solved thanks to the residual category...  The USDA went from a residual of 0 to a residual of Negative 69 million bushels (yes, negative).  This more then offsets the increases in demand and increases ending stocks to 140 million bushels.  And this shocked the market.  

To understand this we need to talk about what that residual category represents because the USDA certainly did not explain any of this in the report except for saying the change was due to the June 30th Quarterly Grain Stocks report.  The residual category is the USDA's miscellaneous category.  This may have originally been intended to account for perished soybeans and other small uses.  Most years this number is positive but in fairly recent history we have seen some small negative numbers here, but nothing close to a negative 69 million bushels.  

What this likely means is that the USDA got the production number wrong last year but does not have a way to quantify that and therefore is reluctant to go back and change last year's production at this time.  It would have been unprecedented if they had done that on this report, but then again so is a negative 69 million bushel residual.  To a point it would be somewhat understandable for the USDA to have made a miscalculation on last years final production numbers as they were shut down during a key time when then needed to be in fields collecting yield data.  They may have missed some of the higher yielding fields.  Either way, this leaves us with a more comfortable old crop carry over even if it makes for an awkward (or unbalanced) balance sheet to look at.  

Sign up for our Morning Ag Hedge newsletter!  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.     

December Corn Daily chart:

November Soybeans Daily chart:

December 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 the USDA Shock Grains Again?

Jul 10, 2014

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.       

On June 30th the USDA shocked the grains markets with it's Planted Acreage and Quarterly Grain Stocks reports.  With the July WASDE report approaching the question is - will the USDA shocks us again?  

The June 30th reports were shockingly bearish for grains.  For soybeans stocks numbers came in higher then expected suggesting that the old crop situation may not be as tight as once thought and for new crop soybeans acreage came in well above the range of guesses.  Corn also had a big surprise as stocks came in above expectations.  This report came at a time where soybeans were looking for direction and this report certainly gave us that.  This time around the market has already been dealt the game changing card and has been under significant pressure leading up to it.  So, after the June 30th report it may be difficult to get a bearish shock on this July WASDE report, but it still could happen.  

The key to the July WASDE report will be how the USDA decides to apply the new acreage and stocks numbers to their balance sheet.  For corn an unchanged acreage number and higher then expected quarterly grain stocks could mean that the USDA will need to lower demand for this year and possibly next year as well.  This will also likely mean higher beginning stocks for new crop corn which will likely add to ending stocks.  

For soybeans the new crop carry over number is the biggest burning question.  Here too, larger then expected quarterly grain stocks could mean slightly less demand for this year and bigger beginning stocks for next year.  But, the biggest surprise on the June 30th report was soybean acreage which came in well above even the highest trade guess.  How the USDA handles this increase in acreage and therefore increase in production on the new crop balance sheet is key.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Soybeans: http://www.zaner.com/offers/index.asp?page=21  

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

With a 3.3 million acre increase in soybean planted acreage the USDA's production estimate is expected to increase.  At this point an argument could be made for the USDA to either slightly raise or lower their national average yield estimate.  However, it seems highly unlikely that the USDA makes any adjustments to yield this early in the growing season.  So, at 45.2 bushels an acre a 3.3 million acre increase represents about a 150 million bushel increase in production.   

If we leave the demand side of the current USDA balance sheet unchanged and simply tack 150 million bushels on to ending stocks then we end up with a relatively huge ending stocks estimate of 475 million bushels.  For comparison old crop ending stocks were last projected at 125 million, last year was 141 million, the last USDA estimate of new crop was at 325 million and the average trade guess is 418 million.  So, if the USDA does not adjust demand numbers then a 475 million bushel ending stocks number for new crop soybeans could shock the market.  

On the other hand, the USDA may choose to offset much of the additional production with increased demand.  If they were to increase demand by 150 million bushels and leave new crop ending stocks at 325 million bushels this could be a shockingly bullish surprise compared to the average trade guess of 418 million bushels.  

We feel the USDA will increase demand 60 million bushels (25 crush + 35 exports).  This would put new crop ending stocks at 421 million bushels which would be slightly above the average trade guess.   The bigger question might be - after being down sharply in front of this report could we rally if this report is mostly neutral to slightly bearish compared to trade expectations?  

Sign up for our Morning Ag Hedge newsletter!  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.     

December Corn Daily chart:

November Soybeans Daily chart:

December 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.

Grains End a Long-Short Week on a Sour Note

Jul 03, 2014

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.       

This holiday shortened week has not been kind to corn and soybean prices.  The week started with a shocking USDA Planted Acreage and Quarterly Grain Stocks report and has not been able to recover.  Weather has also been mostly ideal, adding to the pressure.  For the week December corn was down 33 1/2 cents and November soybeans were down 94 1/2 cents.  As we step away from market to celebrate America it may be a good time to think about the months to come.  

On Monday the USDA shocked the market with a much larger then expected soybean acreage number.  The bearishness did not end there as grain stocks number were also higher then expected for both corn and soybeans.  To make a long story short, this suggests that not only could we grow more soybeans then expected but demand for both corn and soybeans may not be as strong as we thought.  This could all add up to some massive corn and soybean stocks and maybe lower prices for next year.  

When we return from the holiday weekend however weather will become the main focus again.  So far weather has been mostly good with some flooding, hail and small pockets of dryness being the exceptions.  All together we are looking at very good crops on a national scale with corn at 75% good to excellent and soybeans at 72% good to excellent.  These are both historically high ratings.  

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But, there is still a lot of weather to get through before corn and soybean crops are "made".  Again, weather so far has been good for most with the biggest complaint being too much rain.  Weather forecasts are now starting to dry out a bit, which is welcomed by most areas and seen as beneficial for crops for now.  However, after a few days of drying down we may start to wonder when the rain will return and if this could be a change in the weather pattern to more of a hot and dry pattern.  This most likely will not become a real threat to crops but as we approach the key moisture sensitive stages the market could begin to get nervous that we may not reach the record yields the USDA is looking for.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20  

Producers may want to carefully consider selling corn and soybeans on any bounce at this point.  If weather stays favorable on a national scale and crop conditions remain very good we could be looking at some massive crops and massive stocks come harvest.  This USDA report was a game changer in a few ways but all of them are negative for prices going forward unless there is a real weather event that reduces yield potentials.   

Happy Birthday America!!!  And thanks to all the folks that are the heartbeat of this wonderful country!!  

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.     

December Corn Daily chart:

November Soybeans Daily chart:

December 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.

Where do Grains go from Here?

Jul 01, 2014

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.       

As the dust settles after a shocking USDA report the grains were able to find some footing and bounce off the lows.  The Planted Acreage and Quarterly Grain Stocks reports may have now changed the tone in grains for good.  However, after the sharp declines we have seen since the report where do grains go from here?  

Soybeans were sharply lower following the USDA Planted Acreage and Quarterly Grain Stocks report.  In the biggest surprise of the report the USDA increased soybean acreage well more then even the highest trade guess.  This now puts soybean acreage at a new record by a long shot.  Old crop soybeans were not spared from the bearish report either as stocks came in well above the trade guess as well.  This all amounted to a sharp drop in soybeans with the hardest hit new crop November soybeans down $1.00 in less then 24 hours.  The report was not as bearish for corn as acreage came in near estimates but stocks were 128 million bushels above the trade guess.  Lower corn acreage still means we will need a very good corn crop this year but larger then expected stocks could mean bigger beginning stocks going into next year and demand may not be as strong as expected.  This takes some of the pressure off and prices reflected that.  Wheat also was not spared from the bearishness as stocks came in as expected but acreage was larger then the trade guess.  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17  

So, it was a bearish report (especially for soybeans) and the market reacted to it.  Now that prices have come down where do we go from here?  Corn and wheat already had made big moves lower so the bearish USDA report may have just been the icing on the cake.  At this point US wheat is getting closer to being competitively priced and harvest pressure from the winter wheat crop could be subsiding.  Corn has had good reason to see lower prices and the larger stocks number was a reflection of many analysts suggesting that feed demand was too high.  So much of this could have already been factored into the corn and wheat markets.  The big surprise was soybeans.  Larger then expected old crop stocks take much of the tight balance sheet talk off the table and huge planted acreage figures suggest that we could be swimming in soybeans next year.  However, in the case of corn, soybeans and spring wheat we still have to grow this crop.  

Now that the dust has begun to settle from this report the fact remains that the harvest lows this year could now be lower then what we were thinking just days ago.  Corn, wheat and especially soybeans could be looking at bigger ending stocks now.  However, the key to both statements is "could".  Crops are not made in June and we still need to finish out this growing season and weather will still be key in determining production and prices.  So now that this report is out of the way weather may be the biggest determining factor going forward.  

Crops look very good at this point, but we still have to get through the key moisture sensitive reproductive stages in corn and soybeans.  While this report may have added downside potential to grains markets a weather event could change that.  If there are any weather concerns that pop up in future forecasts the market may be quick to build in weather premium.  With the huge soybean acreage soybeans may not be quite as sensitive, but corn needs to see record yield this year and could react sharply to any hint of  a weather issue. 

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20     

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.     

December Corn Daily chart:

November Soybeans Daily chart:

December 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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