TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY 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.
As of the close on Thursday soybeans were over 40 cents off of Monday's highs even with good export sales. However, with favorable weather conditions the trade may now be starting to think that the USDA's current yield estimate may not be big enough. Where do soybeans go from here?
In the August WASDE (World Agricultural Supply and Demand Estimates) report the USDA estimated the national average soybean yield at 48.9 bushels and acre. This would represent a new record national average yield and new record production. But, with recent rains in the eastern corn belt and favorable weather in the forecast is the trade now thinking that this soybean crop may set new records by an even wider margin?
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In the mean time demand continues to show signs of strength. Last week exporters reported new soybean export sales for the 2016/2017 marketing year at 1.94 million metric tons. Of the 1.94 million metric tons a little over 1 million went to China while 770k went to "unknown destinations" which is likely also mostly China. These are huge numbers for this time of year and well above the pace of the last two years.
For the moment the USDA is estimating a 330 million bushel carry over for the 2016/2017 marketing year. While this would have been a comfortable excess a few years ago, record demand could chew through these stocks quickly especially if there were any hiccup in South American production or if demand proved to be stronger than the USDA's early estimates like it has in many years. So, if the 330 million bushel holds true there may be reason to think that soybeans will need to keep a premium in the market at least until South American production is known. On the other hand, if yields (and therefore production) are on the rise than this creates even more cushion and lessens the need for the market to carry premium.
The 2016 growing season has been an interesting one. There have been a lot of arguments about the potential of this crop and the effect of the combination of above normal temps and precip. In the next few weeks we will find out more when combines begin to roll. Strong demand may have given soybeans a reason to be optimistic, but maybenot if we are breaking record productionby a long shot.
We have some complimentary 2016 commodity reference calendars available. They are a little bigger than pocket sized and very useful if you follow markets. (Shipping to the US only)You can sign up for yours here - http://www.zaner.com/offers/calendar.asp
Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action. Ted Seifried - (312) 277-0113. Also, 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.Follow me on twitter @thetedspread if you like.
DecemberCorn Daily chart:
NovemberSoybeans Daily chart:
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
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.