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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.

Old Crop Grains Get No Love Today

May 22, 2012

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.   

 

Old Crop Grains Get No Love Today

Grains as a whole were under significant pressure today but old crop corn and beans lead the way.  You did not have to look far to find bearish news today as it was coming from all angles.  The bearish enthusiasm started off with last night's USDA NASS Crop Progress report showing better then expected corn crop conditions at 77% good to excellent and faster then expected soybean planting with 76% in the ground (compared to 42% on average).  The negativity continued through the night session as the trade began to once again worry about the situation in Europe as well as China's economy slowing down.  Through out the day today the US Dollar has gained strength, at times up over 60 points.  As I write this the US Dollar is up 57 and poised to post a new high close since early January.

On top of a bearish USDA Crop Progress report and bearish US dollar and bearish outside markets, we got a slightly cooler, wetter forecast for next week and this trend continued in the noon report.  Last weeks bullish excitement of this weeks warm and dry forecast quickly faded into thoughts of returning to a more normal weather pattern.

Worst of all, and likely the main culprit for the sharp weakness in old crop corn and soybeans, were the many rumors of china possibily canceling or delaying corn and soybean shipments.  There were even rumors of cargos being canceled and switched to South America.  This has so far not been confirmed, however we did see the Miss River basis drop 7 cents and Export basis drop 9 despite the sharp drop in futures prices.  So, sometimes the proof is in the puddin.

As negative as today was, do keep in mind that there is a relatively tight old crop balance sheet, especially in corn.  With huge acreage numbers, fast planting and the macro economic concern of a rising US Dollar, new crop corn is the bigger concern in my opinion.  Fact is, without a major weather scare we will likely have one of the largest ending stock numbers we have seen in recent history.

For me at least, the concept of buying some relatively inexpensive July Corn Calls may not be a bad idea, especially if they can be used as protection on short December or May calls.  Who knows, maybe China canceled orders today so they could buy corn and beans on sale tommorrow, but they wouldnt do that would they? 

Looking for pricing on new crop using options seems to be the way to go.  Feel free to give me a call if you would like to pick my brain on what I'm doing to help my clients protect their bottom line.

See July Corn Daily chart:

See July Soybeans Daily chart:

This means that speculators should be looking for opportunities and producers need to make sure they lock up prices that makes sense for their bottom line.  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 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. 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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