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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 Catches a Nice Bounce off of Lows

May 15, 2012

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY 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 Catches a Nice Bounce Off of Lows

July corn closed over 25 cents off of the recent low placed on Friday.  Pressure late last week came mainly due to good weather, fast planting and a bearish USDA report.  Last Thursday, in a surprise move, the USDA gave us an old crop corn balance sheet that saw a 50 million bushel increase in ending stocks.  This came as a surprise because none of the private estimates had the USDA raising ending stocks.  The USDA may have chosen to do this because they see an early planting as an indicator of a likely early harvest which could bring supply to the marketplace sooner then normal.  Regardless of the reason it seems that the USDA has drawn a line in the sand at 801 million bushels for the 2011/2012 carry over.

This could mean that we have seen the most bullish old crop USDA report for the rest of the current marketing season.  Also, with good weather and fast planting, bullish fundamental news events may be few and far between.  However, we still have China.  Today there were rumors of China buying circulating the floor and we saw a positive outlook come back into the market.  The other bullish factor out there is that even though we have the corn (at least the USDA says so) it seems that producers are holding tight for now.  As I took a poll this morning of my clients it came to find out that on average guys were holding 20% in the bin and not looking to sell soon.  This can an likely will be very supportive to basis and provide strength to the futures as well.  This could provide good selling opportunities on weather scares but, the dilemma is where will we be rallying from on a weather scare.  If good weather, a strong US dollar and weak outside markets break July corn into the lower $5.00 level then a $.40 rally on a weather scare doesn't do much good even with a strengthening basis.  I believe holding our current low ($5.72 in July corn) is key to holding and looking for a weather scare.  If that low is violated then it may be time to move some cash corn.

See December Corn Daily chart:

This means that speculators should be looking for opportunities and producers need to make sure they lock up prices that makes sense for their bottom line.  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 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?rid=Seifried

Futures, options and forex trading is speculative in nature and involves substantial risk of loss. 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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