Aug 20, 2014
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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.

May Starts with a Bang for Soybeans

May 01, 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.     

The Month of May sure started out with a bang as July soybeans were down over 50 cents only one day into the month.  This is the largest one-day move in soybeans so far this year and it was to the downside.  What does this mean for soybeans going forward?  

July soybeans posted an new high close for the year on Tuesday at $15.20 1/2.  For the last few months soybeans have been on a mission to price ration demand for fears of running out of soybeans this year.  A record pace of export sales, a stronger then expected domestic crush and a lack of Chinese cancellations have fueled the $2.80 cent rally off of lows.  Currently the USDA is projecting a very tight 135 million bushel soybean carryover but some feel that final soybean carry over could be closer to 110 million bushels due to stronger then expected crush and export shipments numbers.  Currently the USDA has exports pegged at 1.580 billion bushels and total commitments are at 1.638 billion.  If we were to ship the total commitments we have on the books we would be 58 million bushels above the USDA estimate and this could severely cut into the 135 million bushel carry over number.  

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However, soybeans were very heavy to start the month of May.  This came from a negative export sales number and talk that more South American soybeans were on the way to the US.  Export sales were negative for the first time this year.  The trade had been watching closely for Chinese cancellations and a negative export sales number for some time but it hasn't come - until this week.  The negative .6 million bushel soybean sales number is a long way from the reduction in sales we need to see to get back to the current USDA estimate.  However, export sales have slowed to next to nothing in the last few weeks and this negative sales number this week could be an indication that more reductions are on the way.  

There has also been lots of talk in the last two days of South American soybeans headed to the US.  Two weeks ago newswires confirmed that there were 2 panamaxes of South American soybeans that had been canceled by China and were on their way to the US.  In the last two days the talk has been that there is now an additional 10 on the way.  In the mean time cash bids at the Gulf and in South America dropped sharply.  This is fueling talk that US imports of South American soybeans may be higher, even much higher then the current USDA estimate.  The USDA is already expecting a record amount of US imports this year but some people think actual imports may be twice as much as current USDA estimates.  This would take a significant amount of pressure off the tight US balance sheet and may end the need for price rationing soybeans.  

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

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.     

May Corn Daily chart:

May Soybeans Daily chart:

May 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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