The Ted Spread

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.      

The obvious differences from one year to the next are plenty.  We could talk about the weather and how last years record planting pace was followed this year by a record slow pace.  We could talk about how much rain we have had this year after a major drought last year.  We could talk about how demand has fallen in the last 12 months.  These are all very important factors to the market and shape the current market climate.  But aside from the obvious differences, I have been thinking about a less obvious one and that is trader/analyst mentality.  

Around this time last year everyone, and I mean everyone was very bearish.  We had an unseasonably warm spring and a had planted crops at a record pace not to mention on huge acreage.  We were expecting a huge crop with huge yields on huge acreage.  We were expecting over a 2 billion bushel carryover for corn which we had not seen in some time.  Then...  Well, we all know what happened.  I didn't rain in 3 months and crops were tortured by scorching heat.   

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The point of this exercise is to highlight that last year the market had been so one sided and in particular so bearish that when the drought set in we all got caught off guard.  Yes, some of us sniffed it out a week or two in advance and purchased some calls to protect our short positions but none of us could have known this time last year that we would see record high prices.  We were all waiting for it to rain and expected the markets to make new lows.  But when a market gets so caught off guard like that it turns into a violent move as stops get hit, new positions are taken and speculators come out of the woodwork to join the party.  Doctors and lawyers and even cab drivers read something from wallstreet and then proceed to look for ways to get in on the action.  

This year is a different animal.  There are very polarized opinions on the markets today.  There are arguments over what did and what did not get planted.  There are arguments over yield potential of late planted crops in near ideal weather.  And, there are arguments over the current demand structure. So much so that we see these arguments play out on the board every day in the form of choppy, two-sided trade.  When something happens, and it will, there will not be as many of us caught of guard.  And it would take another major weather issue to push prices to new record highs after we saw how quickly and easily demand was rationed last year.  

The input for change very well may be the upcoming USDA reports on June 28th.  These reports will answer some of the burning questions out there such as acreage and demand for last quarter and will likely set the tone of the markets for months to come.  It seems the June 28th reports are becoming some of the most important of the year.  But, the market seems to be in a much healthier position coming into this and prepared to take any swings in stride.  There will be buyers, there will be sellers and some will get caught off guard and some will say I told you so but this year we are not all leaning on the same fence.  

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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.

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.      

There were lots of question marks coming into the June USDA WASDE report.  With the release of this report it seems there are now more questions rather then answers.  As it turns out, the June 28th stocks and acreage report is going to be the bigger deal this month and may even be the biggest report of the year.  

Leading up to this June USDA report there was lots of talk about the USDA making changes to planted and harvested acreage numbers.  This did not make much sense to me as the USDA does not make acreage adjustments on this report.  Needless to say they did not change acreage numbers.  And, this is where the problem with this report lies.  Acreage is the biggest question mark of all at the moment.  With late planting is has become fairly clear that there will be at least some corn acreage lost to preventive planting and possibly some soybean acreage as well.  This will have a large impact on the balance sheet, but not this month.  

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So now we are left with trying to figure out how many acres will be lost.  We can all speculate as to where the USDA will settle on the June 28th report, but for now that is all it is - speculation.  And, the USDA has a tendency and/or history of putting out numbers that do not make much sense to those of us who think we know better.  This certainly sets the stage for a huge report when the USDA does finally weigh in on the late planting situation.  

The lack of revised acreage numbers was not the only thing lacking from this report.  There was also very little change in the old crop balance sheets.  It now seems obvious that the USDA did not want to make any major changes before the Quarterly Grain Stocks report.  Also on June 28th, this will give us a much better insight to the supply of old crop grain as we go into the last leg of old crop and a firm gauge on demand in the last few months.  This report will also be highly anticipated and has the potential to be a big market mover due to the tight old crop stocks situation.  

All in all this report garnered a bearish reaction because the USDA did not lower acreage numbers and the carry over numbers were bigger then expected because of that.  But in reality not much has changed since before the report was released.  The USDA made very little change to last month's balance sheets.  The acreage situation will still be a dominant feature of the market for bulls and bears to battle out.  Bears can point to the lower feed demand and say this will be a trend and will offset slightly lower acreage numbers.  Bulls will argue that the lower yield number will be a trend and will significantly tighten the balance sheet when the USDA does in fact lower acreage numbers.  Which ever side of the fence you fall on this report leaves in its wake more questions then answers.  

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I am out of the office until Friday, which is why I am posting outside my normal times this week.  I will be back to the normal routine next week.  But please feel free to give me a call if you would like to talk about markets or your marketing plan.  Have phone will travel...    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.

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.      

Volatility has been high in the corn market as we attempt to determine how many acres could be lost to this wet start and late planting.  As we try to determine how many acres could be lost I think it is a good idea to look at the current USDA balance sheet and come up with a few different scenarios while keeping the demand structure and yield estimate unchanged.  Yield is a big if at this point, but with crop conditions at 63% good to excellent in corn we are on pace to hit the USDA estimate.  Demand numbers are a big if as well, and many would agree that some of the current USDA projections are much too high.  

The USDA is currently looking for 89.5 million Harvested Acres in corn with a 158 bushel per acre Yield.  Under their current demand structure that works out to a 2.004 billion bushel carry over.  But it seems very likely that acreage numbers will be coming down, so we worked out ending stocks numbers based on a 2,3,4,5 and 6 million acre reductions in harvested acreage.  They are as follows:  

87.5 Million Harvested Acres (reduction of 2 mill) = 1.689 Billion bushel carry over  

86.5 Million Harvested Acres (reduction of 3 mill) = 1.531 Billion bushel carry over  

85.5 Million Harvested Acres (reduction of 4 mill) = 1.373 Billion bushel carry over  

84.5 Million Harvested Acres (reduction of 5 mill) = 1.215 Billion bushel carry over  

83.5 Million Harvested Acres (reduction of 6 mill) = 1.057 Billion bushel carry over  

Keep in mind, these are harvested acreage numbers not planted acreage numbers.  We did this because we feel that the percent of harvested acres could go up this year.  Currently the USDA assumes that 92% of planted acreage will be harvested, we think that when all is said and done it could be closer to 94% this year.  But, even if we hold true the USDA's assumption of 92% this would mean a 6.55 million acre reduction in planted acres would be a 6 million reduction in harvested acres.  

I gotta say I'm having a hard time being bullish based on these numbers.  Using the same yields as the USDA (158) if we lost 6 million acres in harvested acreage (which translates into a much bigger loss in planted acreage) and kept the current USDA demand structure the same we would end up with a 1.057 billion bushel carry over!  I have to say, at this point that is the absolute worst case scenario for acreage, and it seems unrealistic to me.   

Furthermore, we feel the current USDA demand structure is much too high.  For example - How does the USDA justify a 925 million bushel increase in feed and residual?  Cattle on feed numbers are consistently disappointing, and there will be significantly more pasture this year.  Or, a 310 million bushel increase in Food, seed and industrial when ethanol numbers are consistently falling behind current USDA projections?  Or a 550 million increase in exports?  You get the picture. 

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When all is said and done we feel like even if we lost 6.5 million planted acres in corn we could still end up with 1.4 million bushel carry over, and that's is with only a modest reduction in feed (down 350 million to 4,995 which is still well above 2012/2013 at 4,400 and 2011/2012 at 4,545) and I left exports and ethanol unchanged even though I could build a very strong case for them being way too high as well.  

From talking to clients I cant imagine it being as bad as our worst fears.  I am having a hard time finding many producers that haven't been able to plant anything.  Between me and my other 3 guys who work for me we only have a handful or two of guys that have yet to plant corn (In Iowa, Minnesota and North Dakota) and aside from guys in the very northern areas they are still expecting to get corn planted.  As far as conditions are concerned my guys do not seem to be worried at this point, they want heat units but feel that will come.  Development may be slow, but guys feel conditions are ideal going into the warmer months.  

Make no mistake about it, markets will be very sensitive to weather this year.  Acreage reductions put huge pressure on yield performance.  Everything we talked about above is based on hitting the USDA's target yield of 158 bushels an acre, but if weather issues start to cut into that yield production numbers will drop fast.  It might be true that a good amount of the acreage lost will be fringe acreage and therefore raise the average yield potential, but weather will need to agree.  If there are issues similar to next year look out for new highs.  

On another note, I think that is really interesting that hedge funds are so bullish.  I suppose I could go both ways on that:  on one hand it seems that the speculators are always the most bullish at the top and most bearish at the bottom, on the other hand I would assume that these guys pay a lot for the research they are getting.  That being said, if the large speculator mentality is bullish they could certainly push prices higher in the short term as I do not see a whole lot of producer selling at the moment.  However, I have to say that so far it has been disappointing to the bulls that after a 30 cent drop in corn in 3 days we can not muster more then a 6 cent bounce off this gap.  Price action seems to be dominated by spreads at the moment but overall feels week.  

We are set up for a wild month now with Monday's crop progress report being a huge deal, then we have our monthly USDA report on Wednesday and then what might be the biggest report of the year in the June 28th stocks and acreage reports.  In the mean time we will continue to trade as a weather market.  So, buckle up right? 

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

Situations like these are exactly why we always consider different strategies when marketing.  Sometimes futures make sense, and sometimes option strategies that leave upside potential open or partially open make sense.  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.

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.      

Corn and soybeans have been very strong in the last two weeks due to concerns about getting the crop planted and fears of shrinking production.  The rally has cooled off lately as better (but still not great) weather may offer some planting opportunities and planting progress has reached 91% in corn and 57% in soybeans.  So was that it for the rally?  Are the concerns behind us now?  

In the short term I really think this is not the end of the strength.  In weather markets, which this most certainly is, volatility is very high as we hang on every weather forecast.  It wouldn't take much of a change to get back toward highs.  Realistically I think we could have 2 more weeks of this planting market.  However, if there is a big jump in soybean planting this week that would go a long way to soothing concerns.  

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Longer term I have to wonder.  I certainly understand that there are acres that will be lost to pp.  However things are almost never as bad as they seem in the moment.  The rally to record prices last summer were a great example, we grew a much bigger crop then our worst fears.  On the same note, all the talk about 4-9 million acres lost will probably end up being excessive.  And, if this weather keeps up yields have a good shot at beating trendline for whatever has been planted.  

I also have to wonder if the USDA would actually show a 6-9 million acre reduction in planted acreage.  Something tells me they would take a much more conservative approach and use the yield and residual numbers to play their math games.  

Either way, we are in store for a few more months of a weather market.  After last year we are very sensitive to any hiccups on those weather forecasts.  But what if the weather is perfect from here on out?  It seems unlikely, but I guess we have to consider that as a possibility.  If that is the case this could be/have been our weather rally to sell.  I think it would be strange to put in highs in June, but as we all know markets do their best to trick us.  Wouldn't it be something if corn and beans rallied into the last stages of planting to encourage producers to get the crop in the ground on ideas of another year of great prices only to fall apart later?  

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

Situations like these are exactly why we always consider different strategies when marketing.  Sometimes futures make sense, and sometimes option strategies that leave upside potential open or partially open make sense.  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.

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.      

The July corn - December corn spread, otherwise known as the old crop - new crop corn spread, has narrowed over 47 cents in the last eight trade sessions.  This is a big move as far as a spread is concerned, and it comes at a very interesting time.  So, what is causing this move in the spreads and more importantly, what does is this telling us?  

In many markets we talk about bull spreading and bear spreading.  Typically a bull spread consists of buying the front month and selling a deferred month in a certain market.  It is called a bull spread because it is done when you are expecting a rally.  In a bear spread you sell the front month and buy the deferred month.  These have a tendency to work if you are right about market direction because the front month usually moves further and faster in the overall direction of the market.  So, for example if you put on a bull spread (buy front month, sell deferred month) and the front month rallies 14 cents and the back month rallies 9 cents you have made 5 cents on the spread.  

In grains, bull spreads and bear spreads get a little more complicated because we grow a crop every year and fundamentals can differ from one marketing year to the next.  A july - December spread is called an old crop - new crop spread because July corn is corn that was grown last year and December corn is corn that will be grown this year.  They are connected however because of the amount of grain that is carried over from one year to the next.  If there is a shortage of grain one year, but the prospects for next years crop are good the July will hold a large premium over the December.  On the other hand, if there are large stocks one year and concerns about new crop production then July will hold much less premium over December.  

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

The second example above is one way that the traditional bull spread concept can be an issue in the grains.  But, even if we have large grain stocks for one year but are worried about the next the old crop will still rally with the new crop because while we are preparing for a short crop the next year we put more premium on the grain that will carry over from one year to the next.  In fact prices will go higher in order to dampen demand so that the amount of carry over is maximised.  

So, knowing this lets look at the current situation.  There was a major drought year in the US last year, so corn stocks are on the tight end of the historical spectrum.  The outlook for next year was that we would have a giant crop on record acreage but too much rain lately has caused concerns that some corn will not be planted therefore causing concern for production.  This certainly could be a set up for a rally, and in this scenario we would expect the new crop deferred contract to rally, maybe even take the lead but given the tight stocks and the need to preserve carry over old crop should follow.  

In the last 8 days we have seen this concept break down.  As concerns about getting the corn crop planted in time have mounted December corn has rallied almost 60 cents off of lows.  In the mean time old crop July corn has not only not been able to keep up in the rally it has actually lost ground.  This is a very strange situation.  It is certainly conceivable that this is a situation that December should gain, but it is hard to justify the complete opposite movements in the two contracts and the huge move in the spread in a short period of time.  

Looking forward this could mean one of two things.  The first possibility is that the old crop July corn contract will be looking to play catch up in a big way on a continued rally.  In this case a traditional bull spread will make a comeback and work well.  The second possibility is that the recent rally off lows in new crop December corn has a different agenda.  By that I mean it is possible that December corn rallied not because of concerns of a tight stocks situation for next year, but for a different reason such as motivating corn producers to do whatever they can to get the corn planted this year even if it means planting late.  In many of the unplanted areas late planting is a risk at this point.  In northern areas there is a risk of loosing production to an early frost.  If this is the case this most likely would not be an extended rally.  

The bottom line is that the big move in the July - December corn spread in the last 8 days is not usually a sign of an extended rally.  

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:

July Corn Daily chart:

July - Dec Corn Spread 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.