The Ted Spread
Ted is the Chief Market Strategist and Vice President in charge of the Zaner Ag Hedge Group and specializes in agricultural hedging employing various strategies using futures, futures spreads, outright options and option combinations. He believes it is paramount to be able to use different strategies to adapt to market conditions. Ted works with large to mid size grain and livestock producers and end users in North, Central and South America.
Are the Highs in for New Crop Soybeans?
May 27, 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.
Many times new crop soybeans will put in their spring high once the crop is 50% planted. This can be especially true in years where there are concerns about planting delays such as this year. The idea is that the market is concerned we may not get all of the intended acreage in and the market is trying to make sure acreage doesn't get lost to corn in the mean time. So, many years soybeans will put in their spring highs before the crop is about 50% planted and then start coming down after that. This year we may not only be looking at spring highs but possibly yearly highs as well.
With soybeans now 59% planted as of May, 25th we are now on pace to get all of the intended soybean acreage planted and the weather forecast looks good. So, it now looks likely that the record soybean acreage that the USDA is looking for will get planted and we could even be gaining some more soybean acres as some of the northern areas are getting past the window to plant corn. With the planting uncertainty falling away from the market this could pull some of the strength out of the market.
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
However, much of the strength in new crop soybeans has been tied to the tight balance sheet and higher prices of old crop soybeans. Old crop soybeans were also down sharply to start the week, but the argument over old crop supply still rages on. Some analysts feel that the USDA is still too low on exports and too high on imports saying that the carry over number should be lower than the USDA's estimate of 130 million bushels. Other analysts will argue that basis is lower in many areas than this time last year suggesting that there are more soybeans out there then the USDA is estimating possibly coming from higher production last year or stronger then expected imports. This argument will likely not be settled until the June 30th Quarterly Grain Stocks report. In the mean time this could continue to support new crop soybeans and keep things pretty volatile.
Looking past the old crop soybeans situation the new crop story is potentially the most bearish fundamental set up of all of the grains. With the US planting a record amount of acres and large global stockpiles of oil seeds we could be set up to see the largest US ending stocks number in recent history. If soybeans get halfway decent weather this growing season new crop soybean prices could be substantially lower come harvest.
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.
July Corn Daily chart:
July Soybeans Daily chart:
July 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 email@example.com
Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&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.