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.
The Bounce off Lows in Corn could Offer Insight for Months to come
Oct 15, 2013
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.
In the last two days corn has managed a twelve cent bounce off of lows while wheat and soybeans have had little interest in participating in any strength. The strength in corn seems to be mostly weather related as wet weather delays harvest. It is unclear how far along corn harvest is, but it seems unlikely that harvest is more then 50% complete.
Wet weather in the northern growing areas, specifically the Dakotas, Iowa and Minnesota have driven harvest to a stand still. Most of the areas that have been effected by this have gotten a good start on soybean harvest but have yet to really get started on corn. The harvest delays are causing basis to strengthen in some areas as grain delivery has been slower then expected. It seems likely that this is just a weather bounce off of lows and that corn will make new lows as the harvest picks up again and more grain becomes available. However, this little two day rally could off a bit of insight into how a strong basis could help rally corn prices if producers hold tight after the initial harvest pressure.
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Soybeans had better then expected export inspections and a slightly better then expected NOPA crush. Even so, price action in soybeans was weak. The NOPA crush number was higher then expected at 108.6 million bu, but sharply lower then last October at 119.7 and August at 110.5. Harvest pressure continues to weigh on soybean prices despite the delays in the north. The markets are giving very little incentive to store soybeans this year so harvest pressure could continue to be a factor for soybeans for a few weeks. The soybeans really need to see a USDA report. The market is assuming that better then expected yields, bigger beginning stocks and lower crush numbers will lead to bigger ending stocks but the question is by how much. The increase in ending stocks may not be as big as the market seems to be expecting, but who knows when we will see the next USDA report.
Wheat also had weaker price action today. Export inspections fell well short of expectations and saw a significant down tick from last week. There are still some bullish fundamentals around the wheat market, but it seems that global buyers have settled down after the 50-60 cent rally off of lows. Technically the December Chicago wheat has had a tough go at breaking $7.00 and could be setting up for a pull back.
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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.
December Corn Daily chart:
November Soybeans Daily chart:
December 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 firstname.lastname@example.org
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.