Sep 1, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


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 Start of a Rally in the Grains, or a Bounce to Sell?

Apr 25, 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.   

Corn, wheat and soybeans have had a healthy bounce off of lows in the last 2 days.  Corn and soybeans just made new recent lows yesterday.  So is this change in momentum signaling a change in the market, or just a temporary corrective bounce on the way to new lows?

Weather is a dominant factor in grains right now.  A cold and wet spring is causing planting delays and fears of loosing planted acreage.  At the same time freezing temps have put stress on the wheat.  Wheat conditions are only 35% good to excellent as of Monday's crop progress report.  Early this week grains were under pressure because of a warmer dryer forecast offering opportunities to plant and relief to the wheat crop.  However, as the week has progressed the forecasting models have developed conflicting outlooks adding concern back into the markets.

If the cold and wet pattern hangs around for a while there could be a significant loss in corn and possibly even soybean acres.  At this point corn has probably lost close to a million acres in the northern growing areas.  If weather improves, a good amount of that could switch over to soybeans or sunflowers.  If not, some or all of it could be lost for the year.  If corn looses 1.5-2 million acres due to this cold wet spring it would have a significant impact.  However, keep in mind that a lot of these acres are what we call fringe acres and we do not expect the highest yields in these areas.  So, the loss in acreage certainly would cut into the production number, but could also raise average yield at the same time.

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

The bigger impact could be on soybeans.  If there is 1-1.5 million acres gained because we missed our window of opportunity in corn there could be a significant increase in production.  Here too this could have an impact on average yield in the other direction.  In the end the increase in soybean production is potentially very bearish for soybeans.  There is a huge amount of soybeans in South America that need to get moved.  If you throw a huge US crop on top of that you could see world soybean prices fall.

As far as planting goes there is a good chance that the worst of the weather is behind us.  Even though the forecasting models are not in full agreement on how the next two weeks plays out they do all look for warmer temperatures then what we have seen in the last few weeks.  Most likely spring will come and we will plant a crop.  Yes, there will most likely be some fringe acres lost for corn and some gained for soybeans.  But the drop in corn production probably will not put corn in tight balance sheet situation while the increase in soybean production could turn out to be quite bearish.

With the weather issues and uncertainty over the forecast I would think that we should see more of a bounce in corn, wheat and soybeans.  Until we are at least 50% planted in corn and the wheat conditions stabilize there should be concern factored into the market as incentive to get the job done.  However, we very well look back a few weeks from now and say we should have sold this bounce.

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

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 while we have corn near $7.00 and soybeans near $14.00. 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

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?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.

Log In or Sign Up to comment

COMMENTS

No comments have been posted, be the first one to comment.
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions