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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.

So Where do Soybeans Stand in this Late Planting Mix?

May 02, 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.   

As we wait to get into fields for some weather to pass, corn and wheat have been able to stay positive.  This should be the case as planting progress is at record lows and tensions are getting high about if we get a corn crop in or not.  Whether it is too late to plant corn or not will really depend on where you are, but for most areas there will still be time as long as the forecast for the next two weeks keeps planting opportunities in it.  But where do the soybeans stand in the mix?

It seems fairly cut and dry in the corn market right now as far as were prices might be going.  It is a weather market, and if weather gets better corn should go down, if weather gets worse or continues to keep planters out of fields then corn should go up.  But, figuring out what this all means for soybeans is a trickier proposition.  On one hand late corn plantings may mean more soybean acres, on the other hand if weather really stays bad maybe that acreage is just lost or worse we cant get the intended soybean acreage planted.  At the same time you have a massive crop in South America, but they have been very slow to step up to the global market.

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

If we walk in next week and the weather forecast is for cold temps and rain or snow will the soybeans follow corn on a limit up move, or come under pressure on ideas that at this point it is time to give up on corn and plant soybeans?  Really I think it depends on how many corn acres are lost.  If corn were to loose 1.5-2.5 million acres there would still be enough corn planted to end up with well over a billion bushel carry over even if we fall short of trend line yields given the projected demand structure.  In this case the added acreage to soybeans along with huge South American supplies would likely mean a lot of downward pressure on soybean prices.  Now, if corn were to loose upwards of 3 million acres the picture starts to change.  In this case there very well could a strong rally in corn which would likely bring soybeans along for the ride despite some bearish fundamentals.  So, it really comes down to how many corn acres really are lost because loosing 1 or 2 million acres in corn is not as big of an impact on the balance sheets as gaining a million acres in soybeans.

In the near term it is very difficult to predict soybean price action or even soybean price reactions to changes in the weather driven corn market.  In the end I believe it all comes down to how many acres are lost in corn.  If there enough corn acres lost then soybeans could be a follower on a rally.  If the corn acreage lost is significant (which it likely is) but not enough to draw ending stocks below 1.2 billion bushels then soybeans will likely be the leader lower on bigger acreage and stiff global export competition.

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

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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