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November 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.

The Soybean Dilemma

Nov 26, 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.        

For weeks now I have been writing about the differences between soybean export sales and shipments.  The choppy trade recently is evidence that there is a battle playing out in the market between the short term and longer term fundamentals.  On one hand you have very strong export sales which have now reached over 93% of the current USDA export estimate and the potential for a tighter balance sheet.  On the other hand you have good weather in South America and the potential for the largest world soybean carry over in three years by a good margin.  For now it seems that the trade sees a need to ration soybean export sales, the problem is that in the long run many of the sales could be canceled or switched if South America has a good crop.  

Export sales for the marketing year starting in September have been on record pace and have already reached 93% of the USDA's export estimate for the entire year.  Sales have stayed strong in spite of higher prices suggesting there is massive global demand for soybeans that will not be deterred easily.  If export sales continue to be as strong as they have been so far soybeans for export will quickly eat up the 170 million bushel carry over the USDA is currently projecting.  In fact, if soybeans were to average 50 million bushels of export sales a week, like we saw last week, the US would have a negative carry over in less then 6 weeks.  If this were to happen soybeans may need to push to even higher prices then the record high prices set last summer to ration demand and maintain some sort or positive carry over.  What price this would happen at is anyone's guess, but so far soybean demand has been fairly inelastic from an export sales point of view.  

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

As I have highlighted in recent articles the problem with this scenario is that although export sales are very strong, export shipments have only been slightly stronger then last year even though the soybean supplies were short at this time last year due to the drought.  As of the last export sales report shipments this year have only been 6 million bushels above this time last year even though sales are well over 300 million bushels above this time last year.  Now, a late harvest could certainly account for shipping delays and export shipments could start to catch up to the export sales numbers.  But, there is also the chance that a good portion of the sales that have been made may never leave our ports.  It is a possibility that countries such as China have decided to "hedge" South America's crop by buying US beans at current prices in case there were a problem in South America.  There are not enough soybeans in the US to satisfy global demand and if major issues were to arise with the South American crop like we had in the US last year the sales being made now would be at great prices and global end users needs would be filled for a while.  But, if South America ends up with a good crop many of the US export sales that have not been delivered could be canceled or switched to South American origin.  

The trade seems to understand both of these points.  While export sales might suggest that the US will run out of soybeans this year, export shipments only reflect a modest increase in US exports.  The problem is that countries could either take delivery or cancel shipments at any time.  So in the mean time soybeans may need to price ration export demand now and worry about cancellations later.  But, if countries are buying soybeans now to hedge against a catastrophe situation then are they really that price sensitive?  If the potential is there for soybeans to hit $19 if South America has major production issues then who is to say countries would not keep buying soybeans at virtually any price as long as they know they can cancel later if catastrophe is averted and prices go lower.  There would likely be a cap at some point as profit margins begin to suffer and global end users decide they have enough bookings but it is difficult to project at what price level this would begin to happen.  This could set up for a wild ride in soybeans for months to come, but there might not be a good way around it.  

Soybean prices may need to go higher for now to slow down export sales.  This would likely be an opportunity for producers to sell at very good prices.  If South American weather stays good (as it is nearly ideal at the moment) soybeans could fall hard if there is a massive cancellation or switching of US export sales.  So, as it seems to be playing out this could be good for the savvy US producer and South America could be the ones who get hit with lower prices as they get into their harvest.  Keep an eye on South American weather, but if things look good as we get into the new year it may be a good time to take advantage of the Export Sales Bubble.  

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.     

December Corn Daily chart:

January Soybeans Daily chart:

December 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

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

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 Bullish Case for Corn

Nov 21, 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.        

A big corn crop and big ending stocks numbers have pushed corn to three year lows.  But, going forward there could be good reason for corn to carve out a bottom in the near future and turn higher.  Lets look at the bullish case for corn.  

Corn export sales have taken a bit of a backseat to the exciting soybean export sales, but corn has seen a lot of interest as well.  On the November USDA WASDE report they increased corn exports by 175 million bushels.  So far, the pace of export sales has suggested that this could certainly be justified.  For the week ended November 14, 2013 corn export sales had reached 960 million bushels compared to the USDA projection of 1.4 billion bushels for the current marketing year.  Compared to 470 million bushels at this time last year this is a big improvement.  Now, this time last year we had just come off of a major drought and record high corn prices which price rationed exports very well, but this is a big improvement none the less.  What this shows is that the price/demand function is working well.  High prices = less demand as we saw last year and low prices = more demand as export sales would suggest this year.  With the current pace of export sales it seems that we will easily hit the current USDA projections and the USDA may need to increase exports in the future.  I do have a concern however (as I have stated in previous articles) that strong sales may not translate into strong export shipments, but for now lets focus on the positive.  

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

Corn used for ethanol is also a hot topic lately.  Last week the EPA proposed a 16% reduction to the current ethanol mandate.  This was seen as a bearish input to the corn market.  While it most certainly was not good news we don't think it will have a major impact on corn prices this year.  Just as with exports low prices should translate into more demand, but with ethanol there is an added bonus.  Energy prices have stayed relatively strong and combined with lower corn prices ethanol profit margins are pretty good.  This is also a big improvement from last year when profit margins were negative due to high corn prices and even the major ethanol producers were lobbying Washington to temporarily relax the mandate.  This year ethanol demand has been strong to this point.  Total ethanol production is currently at its highest since late 2011 while at the same time ethanol stocks are at the lowest level in over 3 years.  This is a great sign of strong demand and while it remains to be seen what the impact will be from the EPA proposal logic would reason that an increase in production, a decrease in stocks and good profit margins are the right recipe for strong ethanol demand in spite of the EPA.  

For the moment corn may not be done putting in lows, but if export shipments start to catch up to the strong export sales and ethanol demand remains strong despite the EPA proposal there is a very good chance that we have seen the biggest carry over number from the USDA that we will see this year.  If the USDA increases export and ethanol demand and lowers carry over numbers it could mean the worst news is behind us.  However, and this is a big one, we need to temper our expectations.  The fact remains that we are looking at one of the biggest corn carry over numbers in recent history and it is highly unlikely that stronger export and ethanol demand alone would turn the balance sheet from a big surplus situation to a tight stocks situation.  At best corn could get into the low $5.00 territory unless there is some big unforeseen game changing event.  But with corn prices as low as they are producers are not in a hurry to sell.  Plus there was a lot of empty storage going into this harvest due to the drought and high prices last year so they can hang on.  It may take higher prices to get corn moving later in the marketing year, especially before we know what next years crop will look like...  Next year could be a completely different story, but as I said earlier lets focus on the positive for the moment.  

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.     

December Corn Daily chart:

January Soybeans Daily chart:

December 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

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

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.

Doubts about Soybean Exports Begin to Grow

Nov 19, 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 prices have held up well in the last month and a half compared to corn and wheat prices.  Much of this relative strength has come from a record export sales pace suggesting export demand for soybeans is hot and heavy.  On the sales side this certainly seems to be the case, but grain inspected for export does not really back this up at this point.  Now, the market is beginning to question the real strength of export demand and soybeans have been on the defensive.  

We have been saying for weeks now that something is not adding up with soybean exports.  Export sales are on a record pace, but shipments are not reflecting that.  In the past few weeks the answer to this has been a slow harvest pace delaying shipments.  Now that the soybean harvest is 95% complete compared to 98% last year it becomes much more difficult to argue that harvest delays are the reason for the large disparity between export sales and shipments.  Now, export shipments have been good for soybeans the last few weeks, but they will have to get even better and stay strong for some time to catch up to sales.  At some point soon the market may decide to put much more weight on export inspection reports rather then export sales.  Normally export sales has more impact on the market, but at what point do sales stop mattering so much if the shipments are not there to follow.  

Getting into the latest USDA numbers we see that export sales are very impressive.  So far this marketing season we have sold 1.252 billion bushels of soybeans compared to .973 billion at this time last year.  The 1.252 billion bushels of soybeans sold so far for this marketing year represents the vast majority of the new USDA projection for the entire marketing year at 1.450 billion bushels.  Soybean marketing years start in September so for sales to so close to the USDA projection this early in the marketing year would suggest that the USDA will need to further increase export demand and therefore decrease ending stocks to tighter levels.  This is what has had the market so excited in the last month and a half, and a big reason for the relative strength in soybeans.  Initial thoughts after the November USDA report was that the USDA would have to raise exports by at least 30 million bushels pushing ending stocks to a tight 140 million bushels.  However, soybeans inspected for export do not paint such a bullish story.  

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

Again using the latest USDA numbers we see that export shipments are not as impressive.  So far this marketing year we have shipped 508 million bushels of soybeans compared to 505 million at this time last year.  In fact, up until last week this years shipments had been behind the pace of last year.  Now, a slow harvest did have an impact on the pace of shipments and we have been catching up, but maybe not quickly enough.  For now we have sold about 280 million bushels of soybeans more then we did last year but only shipped 3 million more.  As of the November USDA report we are expecting a 130 million bushel increase in soybean exports this marketing year.  This is certainly possible but export shipments will have to catch up in a bigger way.  It is also certainly possible that South America has problems with their crop, and if they do we will certainly hit the current USDA export projection and then some.  But, what happens if South America has a good crop?  

Well, if South America has a good crop it will could steal most if not all of the export business from the US.  In fact some of the unshipped sales still on the books could be canceled or switched to South American origin.  Now, South America is notorious for having major logistical issues with getting product to port.  There have been rumblings of improved infrastructure in Brazil for the next harvest but we have heard that before.  It seems likely that global buyers are skeptical of this as well and that could account for some of the export sales we have seen already.  Buyers certainly remember last year when soybeans rallied as the US drew more global business while South America floundered with getting soybeans on ships.  This year it may be the case that they are trying to get ahead of the curve.  It certainly also may be the case that savvy global buyers could be making purchases from the US now in case there are issues with South America's crop.  

If this proves to be true it would go along way to explaining why the record export sales numbers are not being followed up by record shipments.  It would also suggest that there is the potential they global buyers are already covered if there are shipping delays in South America.  So, price direction in soybeans may all come down to how South America's growing season progresses.  If they have a good crop it sets the stage for export sales cancellations, or switches in origin which would likely translate to a bigger US carry over and lower prices.  The recent weakness in soybeans may be flashing hints that the market is getting more keen to this potential set up.  

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

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.     

December Corn Daily chart:

January Soybeans Daily chart:

December 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

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

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.

Grain Report Friday Round 2

Nov 14, 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.        

Last Friday gave us the first USDA Crop Production & WASDE report we had seen in 2 months.  This Friday we have a number of smaller reports that will shed insight into the changes the USDA made last Friday.  Export sales, NOPA crush and a private estimate of next year's crop production should make for an interesting day.  

Export sales of soybeans have been a very hot topic of late and a big market mover.  Last Friday the USDA increased US soybean exports by 80 million bushels and since then many analysis have been suggesting that the USDA will have to continue to increase exports and decrease ending stocks.  It seems that due to strong export sales many in the trade are expecting a 30 million bushel increase in exports above and beyond the 80 million bushels the USDA added in the November report.  We think that at this point the USDA will wait and watch shipments to see if they in fact need to increase export demand.  

The trade is expecting another big export sales number for soybeans tomorrow and we tend to agree.  Many times after a 70+ cent rally global buyers will get nervous about prices going higher and make purchases.  So, we may have to wait till next week to see effective the 70+ cent rally in soybeans has been in rationing export demand.  We suspect it may be more then expected as demand rationing has been easier in recent history as global and domestic demand seems to be more inelastic then in years past.  We saw this last year as aggressive price rationing occurred at much lower prices then what many analysts had expected.  Not to mention south America's weather looks pretty favorable at the moment.    

NOPA crush numbers may be the most interesting numbers we see tomorrow.  We will be looking at the October crush numbers so, this will represent only the second month of this new marketing year.  September crush numbers came in slightly above expectations at 108.7 million bushels.  For October the trade on average is looking for 154.3 million bushels.  This is about a 46 million bushel increase from one month to the next.  One reason given for this huge jump is availability of soybeans as the harvest progressed.  This is certainly the case and we would expect a sizable jump in crush, but 46 million is a lot from one month to the next.  Crush margins are good and soybean meal demand appears strong so it is certainly possible, but if the month to month increase is not as big as expected NOPA crush could be the wet blanket tomorrow.  

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

A well followed private analyst is expected to share their estimates for next year's crop production.  Now, it's early as we are hoping to finish up this years harvest sometime soon, but it will be interesting to see what some analysts are looking for next year.  Next week we will also be putting out our first shot at next year's production.   Here is the thing, it is really just a shot in the dark at the moment.  Certainly we have no idea what weather will look like next year.  But even if we assume normal weather there is the big question of acreage.  If you were to take the prices we see on the board right now you have soybeans gaining acres in a big, big way.  This may end up being the case to some extent, but for there to be a massive shift on a national scale it is going to take a disaster in South America.  

South American weather and acreage will take center stage toward the end of the year into the beginning of next year and then we will have a much better idea of the acreage situation.  The positive here is that for now the price relationship of corn and soybeans may keep analysts from projecting massive ending stock numbers for corn because the board is asking for a major acreage shift.  This could certainly change as we get to know more about South America's production and get more into the acreage battle.  The bottom line is that while production estimates for next year are interesting to look at, a lot will change between now and when we get back into the fields to plant next year's crop.      

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.     

December Corn Daily chart:

January Soybeans Daily chart:

December 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.

Soybeans are on a Mission to Price Ration Exports

Nov 12, 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.        

January Soybeans have rallied more then 70 cents off of last weeks lows.  The USDA report came in mostly as expected for the US balance sheet and with a slightly bullish number for the world ending stocks.  So, for a neutral to slightly bullish report this has been a very positive reaction.  Why are soybeans so strong, and how long could this last?  

The two biggest factors that will give the soybeans direction in months to come will be South American weather and exports.  So far South American weather has been pretty good.  There had been some dryness concerns for parts of Argentina but recent soaking rains have put fears to rest for the time being.  Brazil has had mostly favorable weather so far but there are some areas that did miss out on rain this past weekend.  Rains in the forecast for this coming weekend should keep dryness concerns at bay but if dry areas would miss on the rains again concerns would grow.  South American weather will have to be watched closely as their growing season progresses as any problems would translate into more global demand directed at the US and likely higher prices as well.  

For the moment exports seem to be the key driver of the strength in soybeans.  Export sales as of October 31st have totaled 1.221 billion bushels compared to 953 million last year at this time.  The USDA increased export demand for soybeans on the November 8th report by 80 million bushels to 1.450 billion.  So, the concern is that we are approaching the current USDA estimate with a lot of time left in the marketing year.  However, export shipments as of October 31st have totaled 334 million bushels compared to 360 million at this time last year.  Part of the reason for this has been a slow harvest pace.  

Going forward the market will keep a close eye on export sales.  In particular the market will be watching to see if higher prices will slow soybean sales.  Because soybean export sales to date are at 84% of the newly increased USDA soybean export estimate there is a perception that there is a need for soybeans to price ration export demand.  Many analysts are suggesting that soybean exports will need to be increased by 30 million bushels and that ending stocks are closer to 140 million bushels.  This could be the case if export sales stay strong and export shipments start to catch up with the sales numbers.  

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

It will be interesting to see the effect that the 70+ cent rally in soybeans will have on export sales.  Many times the first sales report after a rally shows strong sales.  This likely happens because buyers see prices going up and they scramble to book their immediate needs.  However, in the weeks to follow global buyers may choose to wait to see how South America's growing season progresses with hopes that they will be able to buy soybeans cheaper in March - May.  If sales stay strong despite good South American weather it could signal that China and other global buyers are simply out of grain from the last few years of global production issues and are simply buying everything they can.  

Export shipments may be the key however.  It could also be a possibility that global buyers remember what happened last year when the US had a major drought, or the year prior when South America had a major drought.  Buyers may be cautious about this South American growing season knowing that if there are any major production issues the US will not have enough soybeans to go around.  So, some of the sales could really be a hedge of sorts.  It is conceivable that countries like China might be making purchases in case of problems and higher prices with the intention to cancel or switch them later if everything goes ok and prices simmer down.  The key to knowing if this is the case will be shipments.  Shipments have a long way to catch up to sales at this point, but if they do soybeans will likely have to work harder to price ration US supplies which could result in higher to sharply higher prices.  

At the moment, our feeling is that some of the strong export sales we have seen to date are precautionary in nature and may never get shipped.  However, we will be keeping a close eye on shipments and South American weather as they may hold the key to soybean price direction.  

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.     

December Corn Daily chart:

January Soybeans Daily chart:

December 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.

When will we see Harvest Lows for Corn?

Nov 07, 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.        

This week the USDA releases the first WASDE supply/demand report we have seen in 2 months.  This is a huge report because it is the first field based look into production numbers this year, and will give us a fresh look at demand after a few weeks of strong export sales.  This report certainly could be bearish and send corn to new lows, however even if it does harvest lows could be just around the corner.  

There is little question that this year's ending stocks for corn will be one of the biggest we have seen in a long time.  The question is how big?  But honestly, I am not sure it will make much difference price wise for this marketing year.  From a price perspective what is the difference between a 1.7 billion bushel carry over and a 2.1 billion?  In both cases we have the need to see low prices to stimulate demand but at what point is big just big?  

Producers will not be very willing to sell corn at or below break even, in some cases well below break even.  And, after years of good prices culminating in last summer's record prices there has been a lot of storage open going into harvest.  In fact many producers have chosen to re invest back into the operation by building more storage in the last few years.  Furthermore, after years of good prices most producers do not have an immediate need for cash.  So, the US producer could be rather tight fisted once the initial harvest pressure is absorbed.  

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

Here is where we see the difference between big and big or 1.7 billion and 2.1 billion.  The bigger carry over could effect prices in 2 ways.  First, it could mean lower harvest lows because there could be more corn that can not be stored on farm but this would most likely be a temporary effect.  Once un-stored bushels are absorbed by the market the cash market may need to firm, maybe even pretty dramatically, to get producers to sell.  So even if we do have a bigger carry over number and put in a lower low, prices for most of the marketing year could be quite a bit better.  

The other effect a bigger carry over number could have is pressure on next year's crop.  A bigger ending stocks number for this year means a bigger beginning stocks number for next year.  A 2.1+ billion bushel carry in to next year should take some pressure off of the next growing season.  There will also be quite a bit less storage available for next years crop, so the bigger the carry over number the bigger the risk for much lower prices next year.  

If the USDA report is bullish vs expectations the harvest low in corn may already be in. Even if this is a bearish report and corn does go down and set new lows it would likely be short lived.  Now that harvest is well over 60% completed and much of the harvest pressure is absorbed it could likely mean that harvest lows will be put in during the next 2-3 weeks at the latest and they could come much quicker if they are not already in.  At this point it makes sense to own Dec Puts to get through this report, but I would be looking for higher prices to sell in months to come.  

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.     

December Corn Daily chart:

January Soybeans Daily chart:

December 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.

Where will the USDA Stand on Soybean Exports at this Point?

Nov 05, 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.        

There are a lot of unanswered questions surrounding the grains markets at the moment.  For one we need to know what the USDA is seeing for US corn and soybean production.  The October report that was canceled due to the shutdown was supposed to be the first field based estimate from the USDA, now we look to the November report for answers.  Another burning question is how the USDA will approach exports.  

Production estimates have varied wildly in the last few months.  It was a wacky growing season in the US with a cold wet start, a warmer June, a near record cold July and a hot and dry August.  It had been difficult to determine the effects of this growing season on crops.  At the time of the last USDA report in September there were still many traders and analysts who felt that the hot and dry weather in August could have done sever damage to crops.  However, as we began to get into fields for harvest results looked better then expectations.  It seems pretty widely agreed that the USDA will have to raise production estimates, but the question is by how much?  

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

While production is certainly a hugely important factor for determining the supply side of the balance sheets, exports will play a big role in determining the demand side.  Export sales have been very good for corn and soybeans so far this marketing season.  Export shipments however have been moving at a slower pace.  A big part of this is because harvest delays have kept grains from the ports and shipments have begun to catch up in the last few weeks, but the possibility remains that some of the sales will get deferred, switched or canceled at some point.  

Soybean sales in particular have been very strong.  However at this point less then 30% of the sales have been shipped.  In the last few weeks shipments have been going out and are starting to catch up to the sales, but we have to wonder how many of these purchases were made with the intention of canceling or switching to South America if South America has a good crop and/or prices go lower.  Also, the US soybean export season runs from harvest till May at the latest so a large portion of our export business for the year may already be on the books.  

With this in mind it brings up the question of how the USDA will account for export demand on this upcoming report.  It seems likely that the USDA will increase export demand, but by how much?  Will they go off the sales number and sharply increase export demand, or will they look at the shipments and choose to increase exports marginally with a wait and see attitude?  If they go the aggressive route and increase soybean exports significantly this could off set increases in production and then some causing a tight balance sheet and possibly the need for price rationing.  If however, the USDA takes a more conservative approach and only increases exports marginally the net result could be a bigger balance sheet and lower prices.  

We will finally get some answers to the burning questions in the grains markets on Friday when the USDA releases their first report in 2 months and the first report using field based data.  This report has the potential to be a big market mover and will set the tone in grains moving forward.  For soybeans in particular the best approach might be having a short position with some short term upside protection.  Let me know if you would like more details on how we are approaching this report.   

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

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.     

December Corn Daily chart:

January Soybeans Daily chart:

December 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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