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January 2013 Archive for 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.

Corn Use for Ethanol

Jan 31, 2013

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.   

Greetings from the Top Producer Seminar!

Another low volume trade day in the grains while we wait to see how much rain falls on South America and their prospects for the next two weeks.  While we wait I figured I might touch on a subject that I personally have heard little about - Corn Usage for Ethanol.  In recent years ethanol production has become a bigger and bigger factor in the corn balance sheet.  We have talked a lot the past few months about corn exports lagging behind at a time of year where we should be seeing big sales, but ethanol thus far has sort of been flying under the radar.

The USDA is currently projecting corn use for ethanol production at 4.5 billion bushels.  This crop year's usage through the first 21 weeks has been just under 1.79 billion bushels.  This works out to 85.13 million bushels a week on average compared to the 87.09 million bushels per week on average needed to hit the USDA estimate.  So corn usage for ethanol is consistently falling 1-2 million acres below the USDA estimate.  This could mean that if ethanol production does not ramp up there could be 50-100 million bushels going back into the balance sheet.

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

Profit margins for ethanol plants in Iowa are running at a loss of 30 cents a bushel.  This is actually an improvement over the previous 5 weeks when profit margins were well over negative 50 cents a bushel.  Yes, there is an ethanol mandate so we can not completely shut down all together, but with ethanol stocks still running 2% over last year there is little to no incentive to increase production at the moment.  This climate could easily change buy a rally in crude oil driving ethanol prices higher or a drop in corn prices lowering input costs, or both.  However, for now it looks like the USDA could be over estimating corn demand for ethanol.

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

March Corn Daily chart:

March Soybeans Daily chart:

March 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 $7.00 and soybeans near $14.00. 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=Seifrie

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

Waiting for Rain

Jan 29, 2013

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.   

Another quiet day in the markets today as grains seem content to hold current prices while waiting to see how weather progresses in key dry areas in South America.  Much of the South America corn and soybean crops are at key moisture sensitive stages of growth.  After a near perfect growing season some of Brazil and much of Argentina have turned hot and dry threatening stress during pollination and pod set.  With rain in the forecast but less confidence after less then expected precip last weekend the markets seem stuck while we wait to get a better grasp on the South American crop.

There is lots of pressure on this years South American corn and soybean crops.  Drought has left the US and the world with tight balance sheets.  A big production number from South America will go a long way to ease tightness on global balance sheets and may even ease tightness in the US.  If SA comes up short there will be tight stocks at least until the US harvest meaning that prices will likely head back toward highs going into the US growing season.  So weather the weather is favorable or harsh will likely determine market direction for months to come.

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

Currently the driest areas are in Southern Brazil and Argentina.  And, right now they are hot which is moving crops toward stress.  As of the noon forecast there is a rain event Thursday through Sunday with 90-100% coverage of 0.3 - 1 inch.  This will help ease stress from building but as of right now stress will likely return with the 2 week forecast being hot and dry.  Also, there is some scepticism about this upcoming rain event as rains last week were less then expected.

So, for now its a waiting game.  Markets will likely react or over-react to any changes in the forecast.  Here we are in a full on weather market at the end of January...  In the mean time I am off to Top Producer, hope to see you there!

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

March Corn Daily chart:

March Soybeans Daily chart:

March 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 $7.00 and soybeans near $14.00. 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=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

The Dilemma Grain Hedgers Face

Jan 24, 2013

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.   

The last year has a lot of guys scratching their heads about what to do with next years crop.  It is a really tough call right now as to which way grain markets go from here.  Will South America bail the world out of tight balance sheets?  Will global demand pick up?  Will we run out of old crop corn and soybeans?  Will the US have another major drought this year?  So many questions and not many answers this time of year.  The biggest problem now is that grains are well off highs and producers who have not locked in higher prices are feeling pressure to do something or risk lower prices.  Yes, many of us are banking on the idea of a summer rally due to tight old crop stocks and continued dryness.

In a perfect world grains would go back to highs in the early spring on dryness and tight balance sheets and everybody sells $8.00 plus corn, $17.00 plus soybeans and the rain comes and we all produce a big crop.  The fact of the matter is that this is an extremely unlikely scenario.  We very well might produce a good crop this year, we sure are due for one, but getting grain prices back to last summers highs may prove to be a difficult task.  As South America moves closer to the finish line with record corn and soybean crops it starts to seem more and more likely that not only does the global ending stock situation become less tight but the US ending stock situation could also become much more comfortable.

It is a scary thought, but what if South America not only prices the US out of all exports but also prices the US out of some domestic demand as well.  Meaning we could very well see some US end users import cheaper South American corn and soybeans.  Hey we saw this happen to a small extent already in their last marketing season.  Now, if South America harvests record crops while US has high domestic grain prices what is to stop the flow of SA product from coming into the gulf and the Carolina's?

This may or may not be a possibility.  I throw it out there to make a point.  Yes we all want to see higher prices to sell, and we are comfortable telling ourselves to wait for higher prices to sell.  But, what if they never come?

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

That being said, I certainly would also love to see higher prices to sell.  After all it is my job to try to help my clients sell at the highest prices we can get.  The key there is - "that we can get".  I have to do my best to protect my clients and I feel that right now there is way too much to loose to sit and wait and hope for higher prices.  On this last rally in the grains I have been able to get some good pricing on some options strategies that allow me to put a floor in close to current prices while giving me some upside potential on a summer rally.  At least I know I'm not going to be much worse off then here and I could still do better.  I will tell you what, it sure helps me sleep better at night knowing I have defined my worst price scenario.  At least it helps me sleep better then the dream of another summer rally that may or may not turn into reality.

And as a an added bonus I came up with a fun little old crop new crop option spread that takes a lot of my rally risk off the table.  You can thank quiet markets for that brain child.  What I am doing here is an old crop call spread that is 30 cents out of the money while selling new crop calls 95 cents away.  The thought here is that if we do rally on tight supplies or dryness going into planting it will come up front, and my old crop calls already have a 60 cent head start.  So, as long as a rally comes from the front we should have made close to a dollar on old crop well before our new crop calls get near the money.  This works great to hedge some new crop hedges and can add to your average sold price, but it also could work as a speculative play.  Let me know if you have any questions or would like more details.  Have a good one! 

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

March Corn Daily chart:

March Soybeans Daily chart:

March 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 $7.00 and soybeans near $14.00. 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

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

Mixed Grain Trade, Looking for Direction from SA

Jan 22, 2013

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.   

Soybeans were higher, wheat was lower while corn was caught in the middle on a slow start to a short week.  Wheat was under pressure from talk that Russia was not going to lift or reduce import duties on wheat.  There was talk Friday that Russia would lift the duty with the intention of buying french wheat.  While the duty is still in place the french wheat is still on the market keeping prices at bay.  Soybeans found buying interest on news that China had bought 2 cargoes and ended up closing over some key resistance.  Corn was flat today as it was caught between soybeans and wheat and the South American forecast had little changes from Friday.

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

South American weather will be the main driver for corn and soybeans in the near term.  At the moment the forecast is calling for the high pressure ridge over Argentina to break down allowing for 60% coverage later this week.  However, the ridge re-establishes itself early next week only to have a chance to be broken again at the end of the 2 week forecast.  This on again off again nature of these forecasts will likely keep some concern in the markets until the rains hit the ground.  If dry areas do get the rain we could be putting a high in for now until the US growing season.  There is no doubt that US ending stocks are tight for corn and soybeans but if South America comes up with a record crop we could be looking at the possibility of the US importing corn and soybeans and making the domestic balance sheet much more comfortable.

There is not much to take away form today's trade aside from the March soybeans closing over the 200 day moving average for the first time since December 19th.  This could be setting up for a longer term double bottom on the daily chart and suggesting a new leg higher.  At the moment I am taking this technical signal with a grain of salt due to the low volume today.  I would like to see another close above today's highs to jump on that.  Either way, it seems that for now any strength in row crops should be concentrated on old crop while most of the bears will focus their energy on new crop.  But, keep an eye on South America.  If the US does start to import SA grain the whole complex (new and old) could break. 

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

March Corn Daily chart:

March Soybeans Daily chart:

March 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 $7.00 and soybeans near $14.00. 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

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

Grains Back Off Resistance, Wait for SA Weather News

Jan 17, 2013

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.   

Corn failed to post its 9th consecutive up day today.  Wait, what?  If I had suggested in December that corn would have a shot at 9 consecutive up days in January you could have called me crazy... 

Grains as a whole backed off resistance levels today stemming from a still dry but more optimistic Argentinean 2 week weather forecast.  Export sales were pretty good this am but as expected.  It is interesting to me that corn sales were higher then in past weeks.  The question here is when did these sales occur?  If they came before the report they were at good prices compared to where we are today.  But, if they came after the report it could mean the buyers are becoming more motivated on a rally.  This is important because a rally could feed on itself for a little while with panicked endusers coming in to buy while further shrinking ending stocks at the same time.

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

Overall direction right now seems dependant on South American weather.  Right now much of South America is at key moisture sensitive stages of the growing season.  In the US this would be like the end of July or early August.  Interestingly enough markets tend to rally when we get into this time frame in the states.  The world ending stocks depend on a good South American production numbers so it is not overly surprising how much weight the markets are putting on weather.  Also interesting is that markets have a habit of putting highs in late July or early August in many years when US crops make it through the key moisture sensitive time frames.  Now it seems certain that we are in for a wild ride when we get into US weather markets due to persistent dryness and fears of a repeat of last year, but if South America gets through the next 2-3 weeks without any major issues could we be putting in a high until mid/late spring?

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

March Corn Daily chart:

March Soybeans Daily chart:

March 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 $7.00 and soybeans near $14.00. 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

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

Grains Springboard off Lows

Jan 15, 2013

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.   

Grains have enjoyed a sharp rally in the wake of the January USDA reports.  It has been a tough trade however with a sharp contrast between old crop and new crop corn as well as a bear trap in the soybeans.  Going forward it would seem that there should be a solid floor under old crop corn due to the tight stocks but the rest of the grains have a more cloudy future.

With a 602 million bushel carry over for 2012/2013, it would seem logical that old crop corn should sty firm into the last few days of the current marketing year.  There certainly is a need to keep prices high to ration demand.  The question is how high?  Is there a need to best the drought stricken summer highs?  At this time I do not subscribe to that school of thought.  Demand has remained slow with the historically high prices.  We did see a surprise increase in corn use for feed and residual but demand for exports and ethanol remains weak.  However, exports may pick up on a rally as buyers shift their mentalities from "wait for lower prices" to "gotta buy now before its gone".  If that is the case we may really have a need to further price ration corn at least until the Argentinean harvest.  Argentina, by the way, increased their corn production estimate to 30 million metric tons up from 28 million.  The USDA increased their estimate for Argentina by 500k metric tons on last Friday's report to 28 million.  South America has a tendency to underestimate their crop to keep prices up for their harvest so I wonder how much corn there really is in Argy.  This may end up being what bails us out of our tight balance sheet.

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

New crop corn is a different story.  Even with the surprise higher demand for feed/residual use, overall demand is relatively weak.  And, if we do have a halfway decent growing season next year we may have to see corn prices extend to the low end extreme to buy back global demand.  Now, there is certainly a possibility of another drought year but it is much too early to assume that will be the case.

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

March Corn Daily chart:

March Soybeans Daily chart:

March 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 $7.00 and soybeans near $14.00. 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

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

What I Expect from the USDA

Jan 10, 2013

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.   

In a word - chaos.  This will be the first time we have had live trading while a January report has come out.  This is important because January USDA reports have a reputation for being big market movers.  In 5 of the last 6 years the January report has sparked a limit move one way or the other.  There are so many moving parts to this report that back in the old days before we traded through reports it would take me a good 45 minutes to go through all the numbers and fully digest it.  Tomorrow will very likely be the case of many overreactions to individual numbers as we pull them off the news wires.  I for one strongly urge the CME Group to reconsider markets being open during the release of a report for the safety of market participants.  The problem here lies in these overreactions to individual numbers making it almost imposable to use a stop going into a report that is almost certainly going to more the market in a big way.  Option prices sure reflect that as well with even the February options that only have 2 1/2 weeks to go still holding a bloated volatility premium.  Maybe tomorrow will help convince the CME Group to rethink this arrangement.  Now, on to the meat and potatoes of the thing.

For wheat and soybeans I think there is some potential for bullish numbers for the US figures, however for both wheat and soybeans the world numbers should carry the most weight as our exports have been (or shortly will be in the case of soybeans) largely priced out of the global market.  There are certainly issues with wheat but the world stocks are still ample and demand is slow making it hard to justify higher prices despite poor harvest results in South America, weather issues in North America and talk of export bans in many countries.  Soybeans have had good export sales in recent months and if this kept up we would run out but the world is about to be flooded by a monster South American soybean crop.  Our exports could very well fall to near 0 once Brazil has product at port.

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

Corn is the most interesting number for me tomorrow.  The US is the major corn exporter of the world and our stocks determine world stocks and therefore world prices.  There are a lot of moving parts to this corn report tomorrow.  On the demand side we will be looking for adjustments in exports and maybe ethanol and feed as well.  It seems to be a given that export demand needs to be cut dramatically after months of dismal sales.  Last month the USDA chose to take a bit of a wait and see stance on exports, well we have waited and we certainly see that nobody is buying at current price levels.  Ethanol may also be on the chopping block as well with our weekly "corn for ethanol" numbers are falling 1-1.5 million bushels below the average needed to hit the current USDA estimate.  At some point this could translate in a 50-75 million bushel cut in demand as well, however the USDA may want to wait some more on that.  Feed demand could also be adjusted lower at some point with cattle on feed numbers consistently showing the lowest cattle on feed since 1996.

So, it would seem likely that the USDA is going to make some reductions on the demand side of the equation tomorrow.  What is a little harder to predict is the production side of the equation.  The USDA could be making changes on planted acreage, harvested acreage, and yield or maybe all three.  Talk around town is that harvested acreage numbers need to come down.  Private estimates still have higher planted acreage numbers then the USDA.  And logically the yield number should have to change if either planted acres or harvested acres changes because if you are taking out harvested acres you are taking out the worst of the worst and this should boost average yield.

My thoughts on the production side are this - I think the USDA raises planted acreage, lowers harvested acres by the same amount as the increase in planted acres there by offsetting any change in acreage, and finally raises the national yield slightly having cut out the worst of the worst.  If this were to happen it would mean a higher production number on a lower demand number (as discussed above) and therefore an increase, maybe a sharp increase in carryover.  If this scenario plays out the corn ending stocks figure could be closer to 1 billion bushels which to me would justify a test of $6.00 - $5.70 old crop corn.  But, we shall see what the USDA has to say tomorrow.

Good luck tomorrow, and please use extra caution in the first few minutes after the report.

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

 March Corn Daily chart:

March Soybeans Daily chart:

March 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 $7.00 and soybeans near $14.00. 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

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

Grains Struggle to Rally off Lows pre USDA

Jan 08, 2013

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.   

Grains attempted to follow through on yesterday's strength in soybeans, but fell flat today after a mixed, low volume day.  With the USDA report coming on Friday it could be that traders are now going to wait, but more likely this is a case of the market not knowing what to do until we get some fresh news to trade.

The last month has been very heavy on grains.  With a complete lack of export interest for corn, favorable South American weather, and improving weather in the US it has been hard to get too bullish on the grains.  The idea that we very effectively price rationed with the summer rally leaves us with the question of what happens if we have a half way decent crop next year.  What will it take to buy this demand back?  And, with South America on the verge of a monster soybean crop how much longer can we enjoy good sales in soybeans?  These are all thoughts that have been swirling around in my head for months now, and the answer to these questions are not popular ones.

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

I plan to dig into my pre report commentary on Thursday, but for now I would like to have a word or two about what we might see between now and the report.  It seems likely to me that in front of this report we could see some speculative and/or protective positions put on by fundamental traders.  After all, this January report has produced a limit move in 5 of the last 6 years.  But as far as the mostly technical fund traders one would think that they would not want anything to do with such a big fundamental influence.  Seeing that the grains have gotten very oversold and are holding above support I would think that we could see some profit taking on short positions from short term tech traders, or even some technical long positions.  But, so far any attempt at a bounce has been disappointing.

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

March Corn Daily chart:

March Soybeans Daily chart:

March 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 $7.00 and soybeans near $14.00. 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

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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