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.
Rain Makes Grain, No Rain Makes Rally
Jun 19, 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.
Rain Makes Grain, No Rain Makes Rally
Corn and soybeans have seen a dramatic rally in the last two days. The thought late last week that the hot and dry ridge over the eastern and southern growing areas has been replaced by more hot and dry weather in the two week forecast. There is a chance for rain later this week and again early next week, however totals look spotty.
The fact of the matter is that corn conditions have dropped 14% in the good to excellent category over the last three weeks and soybean conditions are the worst in ten years for this time of year. Soybean conditions are 29% poor to very poor in Missouri, and 26% poor to very poor in Indiana. The heat early this week will add to that stress and there is a good chance that the drier areas will miss out on any good rains.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
In the mean time the US dollar helped support grain prices as it was down over 70 points at times today. This was due to thoughts of the FED announcing QE3 tomorrow after the conclusion of their two day FOMC meeting.
Also, once we get into the delivery period for July corn we will likely see commercials use the CBOT board to try to force deliveries along the Mississippi at a large discount to cash. This should continue until the discount in futures is small enough that there is no longer any benefit. This could come from either higher futures, lower basis or (most likely) a combination of the two. Either way this could definitely provide strong support to the old crop corn prices and in turn may spill over into the new crop as well.
It will take a significant change in the weather forecast toward a cooler wetter pattern specifically in the eastern and southern growing areas to draw the bullish mentality out of the market. However, in a weather market anything is possible. A tropical depression coming up through the gulf would change things in a hurry.
Options on Beans for People Who Don`t Know Beans About Options: http://www.zaner.com/offers/?page=8&ap=tseifrie
With high volatility in a weather 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 $5.60 and new crop soybeans above $13.80. 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.
Ted Seifried (312) 277-0113 or firstname.lastname@example.org
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