Sep 17, 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.

Should the Corn Market Stop Worrying about Planting Delays?

May 13, 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.       

Corn planting progressed quickly last week with a 30% jump in acreage planted.  This was at the high end of market expectations and is not only 33% ahead of last year, but also 1% ahead of the 5-year average.  Should the market stop worrying about planting delays at this point?  

At first glance the lasts crop progress report would suggest that planting delay concerns and fears that we will not get corn planted should be behind us.  After all we are quite a bit further along this year then we were last year and we planted more corn acres last year.  But, as we dig into the state by state breakdown the picture changes a bit.  Some states made quick progress last week and are now ahead of the 5-year average while other states continue to have big issues.  

The I States (Illinois, Iowa, Indiana) are now on par with or ahead of the 5-year average.  Illinois is 78% planted compared to 53% on average and 16% last year.  Iowa is 70% planted compared to 70% on average and 14 % last year.  Indiana is 61% planted compared to 45% on average and 27% last year.  

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

However, the northern states continue to lag behind. Minnesota, the 4th largest acreage by state is 31% planted compared to 62% on average.  Wisconsin and Michigan are both 20% planted compared to 41% on average.  North Dakota is by far faring the worst at only 3% planted compared to 33% on average and 16% last year.  This is where we could run into a big problem.  We are expected to plant 18.25 million acres in these 4 states, 3 million acres in North Dakota alone.  And, these are areas with a shorter growing season meaning that the window of opportunity to plant is smaller.  So, major progress needs to be made in the next 2 weeks or some of those acres may get switched to another crop or prevent planted.  

At the moment the forecast looks dry enough for some field work to get done in the next 7-10 days but cool temperatures could make drying out a slow process.  So we will expect to see a jump in planting progress next week but how much will be key.  It seems likely that some acres will be lost, especially in North Dakota, but the big question will be how much.  

Some of the potentially lost acreage in the far northern reaches of the corn belt may be offset by more acreage in the states that are ahead of the 5-year average.  Planting progress has been good any corn planted could keep rolling.  There is also the idea that there is still 1.5 to 2 million acres that the USDA did not account for on the Planting Intentions report and that a good chunk of that could go to corn.  But, will this be enough to offset acres lost in the north?   

In a year where we are expecting to plant less corn every acre makes a difference.  Less acreage in lower yielding areas could help the national average yield but it doesn't totally compensate for lost acres.  Also, with beginning stock for next year shrinking to 1.15 million bushels (from what was once thought to be 2 billion bushels) there will be a lot of pressure to have a near perfect corn crop this year to hit the current USDA projections.  

With corn planting now 1% ahead of the 5-year average after being 13% behind last week the market seems to feel like there is less to be concerned about.  However the northern states continue to struggle to get corn planted and this could still have a large impact on corn production and ending stocks this year.  The jump in corn planting is certainly a step in the right direction, but we are not out of the woods yet.  

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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.     

July Corn Daily chart:

July Soybeans Daily chart:

July 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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