Jul 29, 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.

Wheat Closes at New Highs for the Year

Mar 11, 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.     

Wheat prices were sharply higher Tuesday on weather concerns and more talk about unrest in the Ukraine.  Prices had fallen off the highs by the close but still managed to post impressive gains and a new high close for the year.  

A cold snap following a brief warm up is causing concerns about damage to wheat crops.  The US Drought Monitor Index is showing an increase in dryness in the plains and particularly the southern plains.  Cold weather mid-week is now threatening to cause some damage in dry areas.  However, crop ratings are mixed with Oklahoma ratings dropping but Texas and Kansas ratings improving.  Wheat will now trade a weather/Ukraine market going forward.  

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

News that the Ukraine is off to a slow start to spring planting added support as the market is very sensitive to any Ukrainian news.  As of March 7th 46,600 hectares have been planted compared to 300,000 this time last year.  It is still early in the planting season, but the market is sensitive to the Ukraine situation and investors are quick to look for the "Ukraine trade" which wheat has been a big focus of.  This news comes after the Ukrainian Ag ministry had said earlier that spring grain planting had begun on time and the political uncertainty had not had an effect.  This may still prove to be true, but uncertainty and fear is high.   

Domestically the USDA is projecting the tightest ending stocks in the last three years.  While a 558 million bushel ending stocks number is not a tight enough balance sheet to demand higher prices to price ration demand it does put more pressure on producing a good crop.  This means that weather will be followed closely and any threats will be met with strength in prices.  On a global scale wheat ending stocks are on the larger end.  This could keep a lid on prices as the US will quickly loose export business on higher prices and could end up importing on a larger scale if the situation is bad enough.  

For now it seems like investors or funds that would not typically trade wheat are buying wheat to get access to the turmoil in the Ukraine.   

Sign up for our newly renovated Morning Ag Hedge newsletter!  If you have signed up previously there is no need to sign up again, you should be receiving it.  Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17  

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.     

May Corn Daily chart:

May Soybeans Daily chart:

May 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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