Apr 20, 2014
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The Grain Report

RSS By: Sean Lusk, AgWeb.com

This is Tim Hannagan it's Friday, April 11. Our first crop condition report of the year for wheat came out this week and will come out each Monday at 3 PM central time. This report is leaned on heavily by large traders to determine whether the crop is getting better or worse on yields. This first report showed 35% of the crops in the Western wheat states are in good to excellent condition, down 1% from 36% a year ago. A good crop rating is  65%. When this crop went dormant the last crop condition report November 24, 2013 showed 62% in good to excellent condition. The 27 percentage point drop was the largest ever over a winter period and the worst for this time of year in the last 12 years. Two main reasons were the drought and the polar vortex. This winter subzero temperatures were consistent and often and caused a lot of stress and winter kill in the young wheat seedlings lying dormant. Key states to follow are number one wheat producing state Kansas, then Texas, Nebraska, and Colorado. The key to trading now is to follow one weather report at a time one week at a time. The current forecast by WXRISK.com the AG weather site sees rain falling on the eastern side of those major states we just noted. Should this system track farther east over the weekend taking the rain out of the western wheat belt, look for a higher open Sunday night but should the system hold as projected, followed by another rain system, with even more rain called for the following Thursday and Friday we should expect May wheat to break 6.52 support and test 6.44 major support before short covering or profit-taking starts. This first-rain system begins Saturday, Sunday, and Monday and then a second system starting next Thursday and Friday. Although the rain is bearish for wheat, it's brings light support to corn, as  the rain being forecast across the Midwest and the cold temperatures, look to delay fieldwork being done in the Midwest and planting being done in the southern Delta. We don't expect a big corn rally off the forecast but we do expect corn to hold its support at 4.94. Beans of course are planted later so it’s  not as concerned about planting delays at this point but more concerned about the softening demand with Brazil  noting that China has canceled more beans shipments which may be re-purchased by the US to make up for some of our shortfall on ending stocks. Technical’s read like this. May wheat resistance is 6.68 then 680 with support at 6.52 and 6.44. May soybean support is 14.55 then 14.20 with resistance at 15.15. May corn resistance is 5.14 support 4.94 then 4.88.

For those interested I hold a weekly grain webinar each Thursday at 3pm. I cover everything related and pertinent to the grain market in detail. It is free for anyone who wants to sign up and link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.

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Grain Straddle Run 7/31/2013

Aug 01, 2013

Grain Straddle Run 07/31/13

By Dan Burke, Chief Options Strategist, Walsh Trading, Inc.

Grains

The December Corn is currently 474-4 last.  The Dec Corn 470 straddle (114 days to expiration) is showing a last value of 52-7.  The implied volatility is down as corn trades sideways.  I think these are wonderful weather markets.

The November Soybeans are trading 1220-2 last.  The Nov Bean 1220 straddle (86 days to expiration) is showing a last trade of 95-4.  The implied volatility is steady as price action moves sideways to upward with some calm.  I think there are some wonderful opportunities to the upside.

The September Wheat is resting 654-4 last.  The Sept Wheat 655 straddle (23 days to expiration) is showing a last value of 32-4.  The implied volatility is slightly lower on steady price action to the side.  I like put side.

As we take in the price action of the grains, it is my view that the best opportunity can be taken in the November Soybeans (trading last at 1206).  Recently, this market seems to be offering the best opportunity for my clients utilizing conservative strategies for my clients.  It would be foolish for me to try and predict the weather and its influence on production, so in my view, it is important to take advantage of possible market movement in either direction.

Therefore, two strategies that I would recommend are classic option strategies for both the speculator and the hedger.  What I am proposing is the purchase of a combination of two option butterfly combinations.  This entails purchasing the November Soybean 1300 call, the November Soybean 1400 call and selling 2 November Soybean 1350 calls.  The purchase price of the call butterfly is 4 cents, or in cash value $200.  The risk on the trade is the cost of the spread plus all commissions and fees.  In order to be potentially protected to the downside, I also propose buying the November Soybean 1100 Put, the 1000 Put and selling 2 of the 1050 puts. The purchase price of the put butterfly spread is 3.7 cents, or a cash value of $185.  The risk on the trade is the cost on the spread plus all commissions and fees.

At the end of the day, it is my belief that the volatility, along with the unpredictability of the weather, compels us to protect ourselves on both sides of the market.  Spending a combined $385 plus commissions and fees is about as cheap as we get in commodities.  Please feel free to contact the Commercial Hedging Division at Walsh Trading at 888-391-7894. You may also visit us at www.walshtrading.com.

RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING.  THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT.  WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.

Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of Walsh Trading Inc. or its staff.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Walsh Trading Inc. Copyright © Walsh Trading Inc. 

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support refers to an area on a chart where buy orders may be clustered. Resistance is an area where there may be sell orders.  Fibonacci retracement is named after a 12th century Italian mathematician and based on the theory that prices rise or fall by predictable amounts after reaching a high or low. 

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