Oct 1, 2014
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August 2014 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.

Is there Cause for Concern about the Soybean Crop?

Aug 26, 2014

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.       

After a week of fairly wide spread rains the soybean crop conditions came in at 70% good to excellent.  While this is still a very good rating for this time of year it is actually a 1% decline from the previous week.  There has also been a lot of talk about diseases popping up this week.  Should we begin to worry about the soybean crop?  

As of the week ending August 24th the USDA NASS reports the soybean crop condition at 70% good to excellent.  The biggest drop came from Kansas where conditions were down 5% in the G-E category.  The biggest improvement was in North Dakota, up 3%, while 4 other states improved by 2%.  Overall this is the time of year where we expect conditions to begin to decline, but with corn up 1% and all of the rain last week some analysts thought we could see one more improvement.  

The drop in conditions may be somewhat attributed to SDS, white mold and other diseases.  There has been a lot of talk this week about SDS (sudden death syndrome) in particular.  Even though the pro farmer crop tour last week did see some SDS it was not a big topic of conversation in their yield assessment.  Reading between the lines it may be that this is the reason such high pod counts did not translate into a much bigger yield.  And, SDS at this point in the growing season may not have a huge impact on the national average yield.  As a soybean producer in Indiana put it - "August 26, meh.  July 26 it's a catastrophe.  We get it every year here, kinda used to it now."  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17  

On the other end of the spectrum, the North Dakota crop is looking great.  In most years this would not really mean a whole lot, but rail issues and the nations worst corn basis has encouraged a 1.35 million acre increase in soybeans according to the NASS.  This gives North Dakota the 4th most soybean acres in the nation this year behind only Illinois, Iowa and Minnesota.  North Dakota's soybean crop conditions are 75% good to excellent.  Many years ND is a drag on the national average soybean yield but this year they could really help push it higher.  

The bottom line is that at this stage of the growing season SDS, white mold and other diseases may not have a huge impact on national average yield.  This may put a bit of a cap on the upside potential, but crops in the northern states, North Dakota in particular could offset or even more then offset any yield reductions in the I states.  Weather and crop conditions will need to be monitored closely however as an early frost or a much more widespread SDS issue would have an impact.

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Soybeans: http://www.zaner.com/offers/index.asp?page=21

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:

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. 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.

Is the Low in for Dec Corn?

Aug 21, 2014

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.       

This is one of the burning questions in the grains markets at the moment - Is the low in for December corn?  An argument can be made for either side of this debate.  One thing we can mostly all agree on is that any rally in corn could be limited.  But, will the December contract see new lows before expiration?  

There is a lot of convincing things you can say about the lows in corn being in for now.  From a fundamental standpoint the most bearish news about the size of the crop is likely behind us.  A few weeks ago many analysts were talking about some super sized yield forecasts.  Most analysts are now looking at the national average corn yield a little over or a little under 170 compared to the 174-176 estimates we had been hearing.  Now that most of the trade has come back down to reality the thought is that we will still have a record yield and a record crop but not by as huge of a margin.  So the market may have already factored in bigger expectations then the reality.  

Demand has also grown substantially with lower corn prices.  From the 2012/2013 to the 2013/2014 marketing year corn usage increase a little over 2.4 billion bushels!  To put this in perspective this is well over twice the projected carry out from the current marketing year.  The 2012/2013 was a drought shortened crop that saw record high prices which rationed demand substantially and the sharp increase in demand for 2013/2014 was in large part due to pent up demand from the previous marketing season.  However, it is still a very good example of how demand can grow with lower prices.  So far export demand is been impressive for the new crop corn.  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17  

From a technical standpoint a bullish argument can be made as well.  On August 4th December corn made a new contract low and then ended up closing over the previous day's high.  This is called a key reversal and can sometimes be an early indicator of a change in trend.  Then on August 12th, the day of the August USDA WASDE report, December corn came 1 tick away from putting in a second key reversal.  And, on a weekly chart December corn posted a weekly key reversal last week.  When you put all of this together you can build a strong technical case for the lows being in for December corn.  

On the other side of the coin however the upcoming harvest has the potential to put a lot of pressure on the corn market.  We are in a much different position this year then last year as far as the storage situation goes.  There was a huge amount of available storage going into last year's harvest.  This is mostly due to the record high prices of the previous summer motivating guys to clean out the bins and sell everything.  This year there is still a large amount, I'll argue even more then the USDA knows about, of corn sitting in storage.  To make things worse it seems like too many producers waited too long to make sales and there is a lot of unpriced corn out there and much of it could get priced during harvest.  This could cause substantial pressure to the cash market and futures market as well.  If this is the case we certainly could still see new lows in December corn even though the crop might not be as big as what the market was talking about a few weeks ago.  

Longer term I do think we will see higher corn prices.  Once we get past that initial harvest pressure corn prices could have a good chance of going higher.  Low priced corn at harvest could bring in substantial buying from global and domestic end users.  Also, the price of corn can only stay below the cost of production for so long before we don not plant any more corn.  Corn will have work to do to buy some acres as producers ponder planting intentions.  The way the board is now there is no incentive to plant corn and every incentive to plant soybeans.  However, this might not be what the world needs at this point.  With record acreage in the US and South America and record stocks of oil seeds in general we may have bought more then enough acres globally. 

In the short term I am concerned that December corn could still make new lows as we get into harvest even though this crop might not be as big as once expected.  Cash sales coming off the combine may bee to much pressure to keep corn from putting in a new contract low.  However, longer term corn may need to see higher prices to avoid a sharp drop in acreage next year.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20  

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:

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. 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.

Is the Soybean Crop Getting Bigger?

Aug 19, 2014

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.       

A few weeks ago, as we were getting ready for the August USDA WASDE report, trade guesses for the national average soybean yield were wide spread with some analysts looking for a record while some were well below last year's numbers.  The USDA went off of their crop conditions numbers and raised soybean yields slightly.  At the time the general consensus was that soybeans looked OK, but needed rains to really get a good yield.  Now that we have seen some rains in most areas over the last two weeks is the soybean crop getting bigger?  

The Pro Farmer crop tour is out looking at corn and soybeans now and we are all hanging on every word and every tweet.  For the most part it seems that the corn crop is great, a record breaker but maybe not as great as we were thinking a few weeks ago.  For me though, soybeans have been the bigger surprise so far.   

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Soybeans: http://www.zaner.com/offers/index.asp?page=21 

We had a good soybean crop last year with a national average yield of 43.3 bushels an acre.  We could even argue that the national average yield was actually higher then the USDA's number given that we have not run out of soybeans this year despite record export demand.  This may be the result of the USDA being shut down for two key weeks during harvest last year.  Either way, from what I am seeing the Pro Farmer Crop Tour soybean pod counts are coming in well above their numbers from last year.  Chip, Brian and the gang will have more on this as the week progresses.  But, it would make sense that soybeans have really come on in the last few weeks after most areas have gotten some good rain.  

For the next ten days at least it seems like we are going to get some warm, humid and occasionally stormy weather conditions.  This is almost perfect for finishing off the soybean crop.  This could be the recipe for a very good soybean crop and a new record national average yield.  With record planted acreage for soybeans an increase in the national average yield could have a significant impact on production and could end up making a big carryover even bigger.   

Sign up for our Morning Ag Hedge newsletter!  Sign up here: 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:

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. 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.

Is it too Early to Worry about an Early Frost?

Aug 14, 2014

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.        

* I have to say it is difficult to write an article with the Blue Angles buzzing past my window and shaking the building as they practice for the Chicago Air and Water show...  Even more so considering the subject matter of this particular one.  It is funny how grown men turn into schoolboys at the sight and sound of one of America's most awesome displays of progress and power.  In other words...  Can I please go out and play?!?!  Hooray America!!!!  (btw... can we run E85 in those things?) 

As we sit here in mid August the debate rages on about how big crop will be this year.  At this point it seems to be a given that we are looking at record production figures for corn and soybeans.  The question is simply - by how much?  Many analysts will argue that the USDA's national average corn yield is too small at 167.4 bushels per acre and should be closer to 174.  Even though the USDA is already expecting a record by a healthy amount there are those who will argue it is not high enough.  For soybeans feelings are mixed with some analysts looking for record yields while others are looking for yields lower then last year.  Either way a record soybean crop seems very likely with record planted acreage.  

However, as the old adage goes - crops are not made until they are in the bin.  Weather is still an important factor in determining just how big crops will be this year.  Soybeans still need timely rains to fill pods.  Corn could use some moisture to add test weight.  But the biggest weather threat at this point might be an early frost.  If a frost were to catch us at just the right time it could have a huge effect on final corn and soybean production.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Soybeans: http://www.zaner.com/offers/index.asp?page=21

While the USDA shows corn and soybean crops as a whole mostly at or ahead of the 5-year average the northern and some of the eastern states are a bit behind.  Late planting is part of the reason for this but we are also a little behind on heating degree days.  This may leave some areas vulnerable to a frost threat.  And, with the persistence of the "Polar Vortices" this summer some producers may start to get a little uneasy.  

For now there is no frost threat in the 2 week forecasts.  And, longer term forecasts are suggesting a low probability of an early frost.  So for the moment the trade may not be that concerned.  But, forecasts can change very quickly and longer term forecasts especially can be very inaccurate.  I look at may calendar and I see that Monday September 8th is a full moon.  What id we were to get another Polar Vortex in early September on a full moon with no cloud coverage?  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17  

With current forecasts suggesting a low probability of an early frost it should not be a driving factor for the market.  for the moment it probably is too early to be looking for an early frost scare.  Crops are big and could be getting bigger.  But, we may not be out of the woods just yet.  Keep an eye on the forecasts.  

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:

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. 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.

Accounting for the USDA

Aug 12, 2014

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.       

This August USDA WASDE report was a big deal for markets going forward.  Certainly for the raw data that it provides, but maybe more so for the reactions it has generated.  Since this report was released I have seen analysts writing that the lows may now be in while others say that this now sets the stage for new lows.  For the most part the trade is now very much divided about yield prospects this year.  The Pro Farmer crop tour may shed some insight here, but lets take a look at the USDA balance sheet for corn and see how both the bull case and the bear case can be made.  

The USDA is pegging the national average corn yield at 167.4 for now.  This was well below the range of trade guesses of 168-175.  So this corn report found a bit of a bullish vs. expectations reaction.  However, adding 2.1 bushel an acre to an already record national average yield expectation is a big move for the USDA.  Some will argue that this is the first step the USDA is taking to raise yield expectations and there will be more to follow.  Others may argue that crop conditions may start to decline from this point forward, as they seasonally do, making higher yield estimates harder to justify.  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17    

The USDA may have left the back door open for themselves, as they like to do.  Harvested acreage was unchanged at 83.8 million acres.  Some will argue, myself included, that harvested acreage should be closer to 83 million acres.  So, if the USDA needs to raise yield again they could go to a 168.9 national average yield with a lower harvested acreage number of 83 million acres (vs. 83.8 currently) and still come up with a production number very close to their current estimate of 14.032 billion bushels.  Or, if conditions start to fall they could leave yield and harvested acreage unchanged and still keep production unchanged.  

The bottom line is that this report has sparked many strong opinions about where the USDA and markets could go from here.  Ultimately the numbers we are looking at are still bearish numbers but much of that has been factored in already?  This report was expected to be bearish, and it was, but was it as bearish as expected?  Now the market has more to talk about then just super sized yields.  It will be interesting to see what the next few days bring after Dec corn fell just one tick short of putting in its second key reversal in less then two weeks.  One thing is clear, the bulls and the bears now have something to talk about.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20

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:

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. 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.

Yield Expectations and the August USDA REPORT

Aug 07, 2014

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.       

Despite good rains, the market mentality in the grains seems to have changed a little this week compared to weeks past.  Price action in corn, wheat and soybeans are reflecting this change with all three higher on the week as of the close on Thursday.  This change seems to be happening, maybe not so coincidentally, at the same time that analysts are releasing USDA report estimates.  What does this mean for the August 12th USDA WASDE report?  

Last Friday I was on my way to South Bend, Indiana to do USFR and AgDay when I got caught in what seemed like a monsoon (the fact that I was driving way too fast to try to get to SB on time didn't help).  When I did get to South Bend (15 minutes late, sorry guys!) I looked at markets and saw corn and soybeans sharply lower and making new lows.  I then proceeded to get mic'd up and get ready for the cameras.  I walked through those doors with the intention of saying that the market was in the process of factoring in national average yield figures that were way too high, especially for corn.  And, when I did the unanimous response was surprise.  I was talking about a 168.9 national average corn yield compared to the widely accepted 174 that so many had been talking about and I said I was not sure we would see a record soybean yield this year.  Last week saying these things made me a contrarian thinker, a rouge if you will.  This week...  not so much.  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17  

On Monday a well followed and major private analyst came out with yield projections of 168 for corn and 44.5 for soybeans.  This was well below what the rest of the market had been talking about and even a little lower then numbers we are projecting.  In the days that followed we started to get the average trade estimates from the various news outlets and surprise, it showed a lot more diversity then the 174-176 bushel and acre range we had been hearing about last week.  It's funny sometimes how a market audience sometimes has selective hearing.  

As we head into Tuesday's USDA WASDE report we have a wide range in trade guesses for yields, production and ending stocks.  It is not just the super sized numbers we were hearing last week and it may very well be a sign that for at least some analysts the market mentality is shifting.  This also may go a long way to toning down market expectations as a whole.  In my opinion it is a good thing that our expectations are coming back to earth a bit other wise we may have set ourselves up for a shock on this report.  Now, with the wide range of guesses someone will be surprised and someone will say "I told you so" but there will at least be a two sided market and we will get to trade the numbers for what they are.  

For what it's worth we think we have a chance at getting a Bullish versus expectations report on Tuesday.  The super sized yield expectations are still out there even though they are not the only numbers we are hearing anymore.  This has translated into a large range of estimates but it has also driven the average trade guess up.  For corn in particular, where the average trade guess is looking for a 233 million bushel increase in ending stocks, we could be in a position where bearish expectations may be too high. 

For example, what if the USDA puts out a 1.905 billion bushel carry over estimate (our estimate btw)?  This would be 129 million bushels below expectations which logic would suggest would get a bullish reaction.  But is a 1.905 billion bushel corn carry over really bullish?  Have we factored in a larger corn carry over at this point?  I would argue no.  Even with a 1.905 billion bushel carry over we could justify $3.30 - $3.50 corn.   I would not argue with a rally in grains at this point, however I do wonder if a bullish versus expectations report is good for the market.

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Soybeans: http://www.zaner.com/offers/index.asp?page=21

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:

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. 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.

What does a Key Reversal in Dec Corn mean?

Aug 05, 2014

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.       

Sunday night December corn pushed down to new contract lows and by the close on Monday corn was trading above Friday's high.  By definition this is a key reversal for December corn.  Key reversals are not always indicators of highs or lows but they are something that most every technical trader takes notice of.  So, what could this key reversal in December corn mean?  

First of all it is important to note that September corn did not have a key reversal.  Many technicians will argue that if a key reversal does not happen in the front month it does not have as much meaning.  However, even though September corn is technically the front month December corn actually has more volume.  As of Tuesday morning September corn had an open interest of a little over 455k contracts while December corn had open interest just shy of 630k.  So from my perspective this key reversal in December should not just be written off.

Another argument in favor of dismissing this key reversal will be the fact that we are in a weather market and weather markets can be volatile.  While this is certainly true it is probably not a good reason to ignore the chart.  You could also say that a summer Sunday night trade does not mean much.  However, volume was pretty good in the first 15 minutes of Sunday night trading.  The fact is this key reversal in December corn is on a chart to stay so what does that mean for corn going forward?  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17  

Key reversals are certainly not a silver bullet.  Like everything, sometimes they are a anomaly and end up meaning nothing.  However, more often then not they do end up meaning something.  Sometimes, but rarely, they can mark a high or a low.  More commonly they are a red flag for a change coming.  In the case of December corn this key reversal could be an early sign that corn could be getting close to lows or that a change in trend is coming.  

From a fundamental perspective the corn outlook may be changing as well.  As crop conditions have started to come down a little in the last two weeks so have the huge yield projections.  With less rain in most areas we may be taking a little off of the top end potential of this corn crop.  There is no doubt that this is going to be a great corn crop and likely a record setting national average yield, but maybe it is not going to be as big as the numbers that had been flying around the market in the last few weeks.  

While this key reversal in December corn may not mean the low is now in for corn it could be a sign of things to come.  In the short term this could be a technical buy signal until the low is taken out.  In the long term it could be suggesting that at this point corn may be in the beginning stages of trying to find a bottom and maybe even try higher prices.  However, with the size of the corn crop and the size of the projected ending stocks I still wouldn't be looking for a huge rally in corn.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20  

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:

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. 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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