Apr 19, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


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.

Corn and Beans Have Conflicting Agendas

Aug 30, 2012

 

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.

Row crops were moving in different directions today with soybeans making new record highs and corn failing at key resistance. Export sales this morning were terrible for corn with a negative 1.3 million for old crop and only 6.6 million for new crop. For soybeans a different picture all together with a negative 400,000 for old crop, but a new weekly sales record of 26.9 million for new crop mostly to China and unknown destinations (also usually China). It is especially nice to see china
buying beans in a big way at current prices however this may have been the purchase that will tide them over until the South American harvest.

Charts are showing different patterns for corn and soybeans as well. The soybean chart looks like a mature but healthy bull market even though there have been 3 key reversals in the last 2 months. Just using technical studies my trend line analysis suggests we could see 1814. Corn on the other hand is starting to suggest that we could be in the process of a topping formation. The key reversal contract high on August 10th, the failed retest of highs on August 21-22 and today's failure at key resistance could all be suggesting that the corn chart is getting ready to
roll over.

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

So is it possible for corn and soybeans to spend an extended period going in different directions? Yes and no. Keep in mind that it is not terribly unusual for soybeans to put in a summer high 2-3 weeks after corn. This is usually because the key moisture sensitive stages for soybeans is generally 2-3 after corn. Things are a little different this year as we had early planting and drought like conditions over much of the growing area throughout much of the season. I do not think it is likely that corn and soybeans can sustain trends in different directions for extended
periods, but 2-3 weeks could be a possibility.

A wild card to watch over the holiday weekend will be tropical storm Isaac which has the potential to dump significant amounts of rain on Missouri, Central and Southern Illinois, Southern Indiana and Ohio. Some weather forecasts are suggesting 6-8 inches and strong winds. That sort of rain this time of year and on drought stressed crops could cause some damage. If there is much of any
damage Tuesday could be a very interesting day.

When Does Weather Matter: http://www.zaner.com/offers/?page=6&ap=tseifrie

With high volatility in a market, option strategies may be a good tool for hedgers and specs alike.

December Corn Daily chart:

November Soybeans Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have new crop corn above $8.00 and new crop soybeans above $17.00. 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

Please check out my Blog at: http://tedseifriedfutures.com/

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?rid=Seifried

 

Futures, options and forex trading is speculative in nature and involves substantial risk of loss. 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

Log In or Sign Up to comment

COMMENTS

No comments have been posted, be the first one to comment.
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions