Jul 30, 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.

The Soybean Bears are coming out of Hibernation

Jan 21, 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.        

Last week soybeans were attempting to rally back toward recent highs based on South American weather concerns and a strong pace of exports sales.  Soybeans however, were down sharply to start this week as a very important rain event materialized in Argentina and there was talk that China may be done buying soybeans for now.  Until recently some potentially bearish soybean fundamentals had been flying a bit under the radar, but they might now come to the forefront.    

A large portion of the Argentinean soybean crop had been need of relief from oppressively the hot and dry weather pattern that had been dominant lately.  Then Sunday into Monday the rains began to fall.  Follow up rain is in the forecast for later this week.  Now, some areas in Argentina have seen enough stress to permanently cause losses in yield potential, but recent rains will go a long way to salvaging the yield potential of the crop.  

There is also news that China plans to end its soybean stockpile plan.  This could mean that they will be less aggressive buyers going forward, but it could also be suggesting that cancellations and/or switches in origin are on the way for the unshipped sales we have on the books.  Personally, I think China likes to play games with the markets and I am not so sure that they will stop buying soybeans.  But, at least for the moment it seems that one of the biggest bull drivers of the soybean market may have been taken away.  

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

This might leave the soybean market with some less bullish fundamentals to digest.  The South American crop will be coming on line in the near future.  South American pricing is already running well below current US pricing.  So, barring any major logistic setbacks South America is poised to take over the world export market in the near future.  And, the USDA is projecting a huge world carry over in soybeans which might mean that prices may need to go lower to stimulate increased demand.  

The weather market might not yet be over for the soybeans however.  Even though Argentina got some much needed rain they would certainly like to see some follow up rains in February to fill out pods.  And, although Brazilian weather has been near ideal this growing season at some point the market may get concerned about being too wet to harvest of get soybeans to port.  This could extend the US export season, but China may have already made purchases for this reason.   

Delays in getting product to port in South America might mean less cancellations and/or switches in origin but it might not mean more export sales like it did last year when global buyers seemed to get caught empty handed when Brazil was experiencing major harvest delays.  This year it seem that China and the gang have planned ahead and overbooked their needs just in case.  Selling soybeans on bounces may be the way going forward.  The old crop soybean situation has kept prices relatively strong compared to corn and wheat.  This window might be closing however with South America moving toward the finish line.  

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.     

March Corn Daily chart:

March Soybeans Daily chart:

March 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

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

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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