Jul 11, 2014
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The Ted Spread

RSS By: Ted Seifried, AgWeb.com

Ted is the Chief Market Strategist and Vice President in charge of the Zaner Ag Hedge Group and specializes in agricultural hedging employing various strategies using futures, futures spreads, outright options and option combinations. He believes it is paramount to be able to use different strategies to adapt to market conditions. Ted works with large to mid size grain and livestock producers and end users in North, Central and South America.

Corn and Soybeans Fall Under Pressure, but is the Rally Over?

Jun 04, 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 and soybeans have been very strong in the last two weeks due to concerns about getting the crop planted and fears of shrinking production.  The rally has cooled off lately as better (but still not great) weather may offer some planting opportunities and planting progress has reached 91% in corn and 57% in soybeans.  So was that it for the rally?  Are the concerns behind us now?  

In the short term I really think this is not the end of the strength.  In weather markets, which this most certainly is, volatility is very high as we hang on every weather forecast.  It wouldn't take much of a change to get back toward highs.  Realistically I think we could have 2 more weeks of this planting market.  However, if there is a big jump in soybean planting this week that would go a long way to soothing concerns.  

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Longer term I have to wonder.  I certainly understand that there are acres that will be lost to pp.  However things are almost never as bad as they seem in the moment.  The rally to record prices last summer were a great example, we grew a much bigger crop then our worst fears.  On the same note, all the talk about 4-9 million acres lost will probably end up being excessive.  And, if this weather keeps up yields have a good shot at beating trendline for whatever has been planted.  

I also have to wonder if the USDA would actually show a 6-9 million acre reduction in planted acreage.  Something tells me they would take a much more conservative approach and use the yield and residual numbers to play their math games.  

Either way, we are in store for a few more months of a weather market.  After last year we are very sensitive to any hiccups on those weather forecasts.  But what if the weather is perfect from here on out?  It seems unlikely, but I guess we have to consider that as a possibility.  If that is the case this could be/have been our weather rally to sell.  I think it would be strange to put in highs in June, but as we all know markets do their best to trick us.  Wouldn't it be something if corn and beans rallied into the last stages of planting to encourage producers to get the crop in the ground on ideas of another year of great prices only to fall apart later?  

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

Situations like these are exactly why we always consider different strategies when marketing.  Sometimes futures make sense, and sometimes option strategies that leave upside potential open or partially open make sense.  If you are looking for ideas or want to talk strategy feel free to give me a call or shoot me an email, you will find my contact info below.

December Corn Daily chart:

November 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 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.

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