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.
Is this the Calm before the Storm in Grains?
Jan 28, 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.
Grains markets seem rather indecisive to start the week even though there is a lot of "big picture" news swirling around. Something tells me this is just the calm before the storm, but for the moment grains seem to be lacking much of a sense of direction.
Macroeconomic issues are getting a lot of air time on the boob tube as the usual suspects rant on and on about the Fed meeting and global economic concerns. Certainly these are issues that can and will effect the grains markets but even the markets that are very sensitive to these sorts of things are unsure of what to do. For example, the S+P index was sharply lower Friday, all over the place yesterday and higher today. What are we supposed to take away from that? If the world is headed for a big economic downturn that would have a bearish effect on grains markets, but is this a real threat or just the latest hype from the media?
Weather, as always, is a big factor for the grains markets. As we all know (the other super hyped news flash de jour) it is cold in most of the US but especially in the upper Midwest. Polar vortex, we made a new term for - darn it's cold... Well, the cold weather is causing winter kill fear for wheat, river traffic to slow to a screeching halt and increased feed demand because livestock need to eat more to compensate for energy lost while trying to keep body temps up. Ultimately these could be short term bullish issues as the impact might not be big enough to really change the balance sheets.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
South American weather is probably the bigger factor. Now that Argentina's weather has taken a turn for the better the biggest concern will be harvest conditions. Any harvest delays could cause world end users to continue to buy US grain which could dramatically tighten the domestic soybean balance sheet. This could cause the need for higher prices and price rationing to slow export demand. For the moment the forecast looks good but we will be watching closely for any changes in the outlook.
Finally, a story that has kind of flown under the radar thus far, Argentina is now allowing its citizen to purchase US dollars for their savings accounts. This could seriously open up some door to global trade in Argentina. Many countries have avoided doing much business with Argentina because of the uncertainty of their Peso. It seems possible that Argentina could start selling grain in US dollars. This could add a lot of selling incentive for them.
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.
March Corn Daily chart:
March Soybeans Daily chart:
March 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
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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.