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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.

Is the USDA going to have to Raise Yield Projections?

Oct 03, 2013

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.        

Over the last few days we have been getting a lot of feedback on harvest results.  The overwhelming majority of reports sing a similar tune - Better then expected corn yields and much better then expected soybean yields.  If this really is the case on a national scale is the USDA going to have to increase yield projections?  That is when or if the USDA is back in business...  

Earlier today I was speaking with a producer in North East Indiana and he was telling me about how his harvest was going.  They had been combining soybeans for 4 days so at this point they felt their yield estimates were fairly accurate.  Going into harvest they were expecting soybean yields in the low 40s, as it turns out they were actually averaging well over 60 bushels an acre!  That is 20 bushels or about 30% better then expected.  And this is not a unique story.  We have been hearing much more of the same from all over the map.  Plants seem to look small but have a lot of pods.  About the only complaints I have heard were about bean size, but that has been few and far between.  Maybe soybeans fared better then we expected through the warm and dry August.  

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

So does this mean that the USDA was wrong to lower yield estimates on the August USDA WASDE report?  Maybe, maybe not.  It still might be too early to tell.  The real question will be answered late harvest.  It is the later planted acres that may be the key.  Late planting due to the cold wet spring meant that some fields were planted later in key areas such as Iowa, Western and Northern Illinois, Wisconsin, Minnesota and parts of the Dakotas.  The later planted fields may have sustained much more damage during the hot and dry period in August.   

Also, the USDA did not lower yield estimates by nearly as much as some people were thinking they should at the time.  Maybe they got something right, maybe they got lucky.  But I think that if there is an October USDA report they should hold tight on yield estimates until the harvest is complete.   

Either way it certainly seems that yields are going to be much better then what the market was pricing in during the hot and dry spell in August.  At this point I really do not think a 39 bushel national average yield for soybeans that we heard so much about during the sharp rally in August is possible.  If anything the USDA may have to raise yield numbers for soybeans but I think it is too early to tell for sure.  Corn yields have been better so far, but I do wonder if things get worse as the harvest moves North.   

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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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COMMENTS (1 Comments)

BirdogJessieJoan - Atlanta, MO
Well I have a Question, how will the FUNDS be able to trade or manage their short positions without the GOV.'S funny numbers while its shut down. Numbers off of the combines will not do them any good, they don't know one end of a combine from the other. If lower yields and wet weather come along and the markets grind higher do you think might panic and puke their guts out on their short positions and $h!t all over their self's trying to get out the door? If farming was easy everybody would want to do it.
7:13 PM Oct 3rd
 
 
 
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