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.
Waiting for Answers in the Grains
Sep 24, 2013
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It has been a fairly quiet first two days of the week in grains as the trade braces for the upcoming USDA Quarterly Grain Stocks report on Monday. It is also the time of year when many market participants are busy getting into or getting ready for harvest. The fact that this has been a strange weather year adds to the unknown as we wait te get a better idea of harvest results.
The upcoming USDA stocks report could have a big impact on grains markets. It will solidify ending stocks numbers for the old crop, determine beginning stocks numbers for the new crop and give us a window of insight into the demand side of the equation. This is a difficult report to predict however with last years drought drawing production numbers into question and high prices effecting demand. For example ethanol demand for corn was around 90 million bushels less then the USDA estimate by our calculations. Now this may have been a way for the USDA to offset what could have been a lower production number or it could mean a higher then expected stocks number. Either way this report will help set the tone for months to come.
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The bigger question right now is production. There has been much debate over the last month and a half about how the strange weather this year has effected production. With a cold and wet spring causing planting delays, a cold July and a hot and dry August it is very difficult to know exactly how crops fared on a national level. The answer to this question comes from combines. As we work through the harvest we will have a much better idea of how good or how bad this crop year was. Initial reports have been better then expected for corn and soybeans, however harvest thus far has been mostly in areas that have had near ideal conditions. As harvest moves north into Central and Western Illinois and Iowa and Minnesota and the Dakotas it is certainly possible that yields start to come in below expectations and partially of fully offset the better results we are getting further south.
It seems that we will have a big corn crop and a big carry over figure. At this point the question will be how big. The bottom line for soybeans is that things may not be as good as we were thinking in July or as bad as we were thinking in August. Really we will not totally know until half way through harvest when we are seeing what is actually out there. It does seem that what the market is saying now is that assuming the USDA numbers are correct and the drop in crush numbers last week are accurate. This could mean we may not need to see higher prices to price ration demand. So, now it may be a waiting game to see more harvest results.
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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 $5.00 and soybeans near $12.00. 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 firstname.lastname@example.org
Please check out my Blog at: http://tedseifriedfutures.com/
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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.