Jul 24, 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.

Soybeans Show Hints of Strength as Corn and Wheat Act Weak

Jun 25, 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 have enjoyed a nice 2 day bounce off of recent lows driven by strength in the July contract.  Corn and Wheat on the other hand have seen flat to weak price action.  We have to wonder if soybeans were not holding strength if corn and wheat would lead the way lower.  

July soybeans have stayed strong going in to delivery period on the idea that commercials could be using the board to source soybeans at a discount to basis. This means that potentially the big end users who already have terminals at the delivery points may be buying soybeans on the futures board with the intention of taking delivery because futures prices are still lower then cash prices.  This situation can turn into what is called a short squeeze where entities that can and would take physical delivery will hold onto long futures positions until the price is at or above cash prices. This puts the speculators that held onto short positions going into the delivery period in a bad spot.  They do not intend to actually deliver grain so they must buy futures back however there are no willing sellers until prices are significantly higher.  

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The strength in soybeans the last two days may be lending support to corn and wheat as well.  Aside form the strength in soybeans, corn and wheat have had weak price action.  Corn has a lack of bullish news to get the bull camp excited at the moment and weather looks good for the foreseeable future.  The spring wheat harvest is putting pressure on wheat and has prices near lows.  The good news I suppose is that the strength in soybeans may stick around at least until the report which could keep some support in corn and wheat.  

Strength in July soybeans will likely stick around for at least a day or two.  However the upcoming quarterly grain stocks report will have a big impact on direction going forward.  If the stocks number is bullish this could send july soybeans sharply higher.  If the stocks number is bearish this means that there are more soybeans around then we thought and this would put significant pressure on cash prices which for reasons stated above would also put significant pressure on the July futures prices.  

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

This USDA report on June 28th is shaping up to be one of the biggest reports of the year.  It will likely set the tone for months to come.   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 $5.50 and soybeans near $13.00. 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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