TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY 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.
Last year the March 31st Prospective Plantings report was rather bearish for corn. The trade was expecting corn acres to drop to near 90 million but instead the USDA's survey projected 93.6 million acres. Corn responded immediately with lower trade, but in the following days corn found some footing and started to rebound. Will this be the case again this year even if corn acres come in higher than expected again?
Similar to last year the trade is expecting a sharp decline in corn acres in favor of more soybean acres. And, while the argument this year may be more compelling than it was last year I wonder if the trade might be disappointed again. Either way it certainly was impressive that corn was able to shrug off the negative news relatively quickly and turn higher. I also wonder if corn can do something similar this year.
Given all of the things we know about the corn market right now I am not terribly bearish corn, even if acreage were to come in a little higher than trade expectations. Demand has been good at lower prices and globally there is a movement toward fewer corn acres. The adage "low prices are thecure for low prices" might be in action in the corn market. However, I think it is very important to understand last year's spring rally in corn in order to set expectations for this year.
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Last year there were a few weather forecasters that were all excited about the potential weather for the US growing season. One in particular who was touting sharply higher prices in corn. Either way the weather guys made a compelling argument and the corn market responded with building in a significant weather premium. Long story short the weather guys were right about above normal temperatures, but we also had very good precipitation in most areas. In the end we had record yield for corn and soybeans and we came no where near the projected prices the weather guy(s) had advertised.
This could mean that the trade might be very reluctant to add significant weather premium into grain markets this year. Last year the market was talked into a big weather premium based on potential weather threats and we ended up with record yields. The market might not be willing to make the same mistake again. What this might mean however, if there were to be an weather issue this year, the market may be late to react but react sharply...
I would like producers to think about this when they are putting their marketing plan into action this year. The upside potential in corn, if much,may be greater in the later part of the growing season. I am not suggesting we put off making sales recklessly. I am saying that it might be a good idea to look for ways to replace opportunity on sold bushels, and if you do make sure you have enough time on them. In my opinion I would want to be out at least to August if not December.
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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.
MayCorn Daily chart:
MaySoybeans 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.