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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.

Weak Price Action In Grains Despite Less then Expected Rain

Sep 03, 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 were sharply higher after getting less then expected rains over the long holiday weekend, gaping higher and at one point were up over 50 cents.  Corn and wheat followed during the night session but had a hard time holding on to strength early on in the pit session and found mounting selling pressure as the day wore on.  Soybeans still posted an almost 30 cent gain on the day, however price action overall in the grains was much weaker then in the night session.  

Less then expected rains over the long labor day weekend fueled concerns about declining yield potential, particularly in the soybeans.  Hotter then expected temperatures added to the stress.  Soybeans led the charge Monday night gaping higher and at one point were up over 50 cents.  Corn and wheat followed in the night session but things seemed to change as soon as the pit opened.  

While less then expected rain is not great news for corn it may be too late to impact yields significantly enough to lower production to levels where the balance sheet would be tight and price rationing would be needed.  It might be argued that the hotter then expected temperatures over the holiday weekend helped push corn toward maturity and help soothe concerns over an early frost.  At the same time US wheat seems to be over priced on the global market as we are consistently reminded of every time we loose the bid on optional origin tenders.  

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

Soybeans too may be close to putting in highs for the time being.  Twice in the last 10 days the November soybean contract has tried to break through contract highs at $14.10 and has failed both times.  While I do believe in the saying - keep knocking on the same door and eventually its gonna open - it also seems that soybeans have had a hard time with this in recent history.  Back in mid July the November soybean contract tried 7 times to get through $13.00 and failed before moving to recent lows at $11.62.  Now, as we all know the November soybeans eventually smashed through $13.00 due to weather issues and yield concerns, but could $14.10 be the new $13.00?  

Soybeans could certainly go higher, but it could be the case that they have reached or are close to reaching their upside objective until more is known about actual harvest yields.  

Sign up for our Morning Ag Comments: 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 while we have corn near $5.00 and soybeans near $12.00. 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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