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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.

Where Is the USDA Rally?

Oct 16, 2012

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.   

 

What a train wreck of a USDA report.  Even though I held on to my shorts and trusted my November 750 corn calls to protect me, I was really looking forward to selling $8.00 corn again.  The tightest corn carry over we have seen so far this year should be enough to test $8.00 right?  Well, it is certainly not acting as such.  Thursday's low represents key support and we have not yet seen a close below this key level but things are not looking good. 

Yesterday we managed a close below both the 9-day and 20-day moving averages, and today we rallied up to test them as what was support has now become resistance.  This attempt at a rally to get back on track ended with corn up one measly cent.  Again, key support remains in tact, but today's failure to get back above moving averages is not a vote of confidence.  I am still holding my November Corn 750 calls to protect my short position, but it is looking more and more like I will not need them after all.

Soybeans looked good this morning as news of to cargos sold to unknown woke the bulls up with a smile.  The attempt at a rally after partially closing the gap left over the July 4th holiday looked strong for a moment when we were up 23 cents but faded into the close leaving beans up only one and a quarter of a cent for the day.  I am not sure how to look at this any way other then disappointing.

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Upside might still be limited for the time being.  Corn and soybeans could certainly find more producer selling on rallies as the harvest is still a factor and prices are good.  And, there is a side of the trade that thinks that the USDA is now 3-6 bushels short on corn yield.  Informa in particular is using a 127 yield, while the USDA is at 122.  By the way, good job informa for pegging the USDA soybean yield at 37.8, dead on.  There is a good chance that when we see the final USDA harvest numbers in November that the corn yield ends up quite a bit higher.  If that November report is as bearish as I think it could be, and El Nino holds up in SA our post-harvest bounce could be very disappointing.

New highs might have to wait until the end of the growing season when the bins are running dry.  Even then it may be dependant upon a bad South American crop and new weather concerns for our growing season.  That is too many what ifs for me.  I am looking at this failed USDA rally as a red flag to get some good pricing as best as I can in the next few weeks.  Give me a call or shoot me an email if you would like to know what my strategy is.  Thanks for reading.

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

With high volatility in a market, option strategies may be a good tool for hedgers and specs alike.

December Corn Daily chart:

November Soybeans 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 new crop corn above $7.00 and new crop soybeans above $15.00. 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=Seifried

When Does Weather Matter: http://www.zaner.com/offers/?page=6&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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