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.
On Tuesday the November soybean contract set a new high close for the year. Just weeks ago most analysts, producers, traders and end users thought this kind of move was impossible given the current fundamentals of the market. So what has changed and will it last?
First off, this unprecedented move in soybeans and soybean meal might be difficult to comprehend for many, but for the American producer this is a opportunity to do something that just a few weeks ago was seen as an impossibility - lock in positive profit margins for the year. This opportunity should not be taken lightly and should be taken advantage of one way or another. We have specific strategies we are using, feel free to contact us to hear more about them.
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Some will say that the lower US$ is driving soybeans higher, or the lower Brazilian Real, or inflation concerns. While I do believe that currency exchange is helping US exports on the global market and I do feel that commodities as a whole have recently gotten a boost from inflation concerns I do not think this can account for such a strong rally. Weather concerns in South America are another reason given for the strength. Brazil has gotten hot and dry for their second season crops and Argentina has been getting terrific downpours on maturing crops also causing damage. This potential loss of production will have an impact on a global balance sheet, but not likely a large enough one to spur this kind of strength.
I feel that more likely the strength in soybeans is coming from a tightness in soybean meal stocks. With low crush margins soybean crushers slowed down the soybean crush in the last few months and soybean meal demand (both domestically and abroad) remained strong. So, this may just be soybean meal correcting the crush margins in order to spur the crush into higher levels. If this is the case this problem could be eased in a matter of weeks because soybean crushers have the soybeans to crush and they were bought at lower prices so profit margins are much better than the have been.
Regardless of the cause the opportunity is still there. We are still looking at a 400 million bushel carry over in the US. We still have a very comfortable global balance sheet. We are still intending to plant 82 million acres of soybeans this growing season. So, while this rally in soybeans may not be over just yet producers need to take a close look at their bottom line and lock in profitable profit margins when the opportunity is there. And, if we are worried about giving up opportunity for higher prices especially for the growing season there are strategies to replace that opportunity. Our best advice for this marketing year is - Use cash sales to manage risk, use the board to manage opportunity.
We have some complimentary 2016 commodity reference calendars available. They are a little bigger than pocket sized and very useful if you follow markets. (Shipping to the US only)You can sign up for yours here - http://www.zaner.com/offers/calendar.asp
Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action. Ted Seifried - (312) 277-0113. Also, 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. Follow me on twitter @thetedspread if you like.
May Corn Daily chart:
May Soybeans Daily chart:
May Wheat Daily chart:
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 firstname.lastname@example.org
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.