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.
November soybeans have managed a 40 cent bounce since putting in lows on September 1st. The strength has been fueled by strong export demand and disease concerns. However, with good weather since the beginning of August and increasing yield expectations how far can soybeans go?
The export sales train is in full swing for new crop soybeans with weekly export sales approaching 2 million metric tons per week the last few weeks. While this has been supportive for the soybean market we almost need to keep up this fast pace of exports to hit the USDA's expectations. Still, the timing of these large purchases by global end users are a vote of confidence that prices are currently "of value" or that there is concern for the South American growing season.
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From a weather standpoint we had a favorable month of August in most areas and expectations for soybean yields have been increasing. However, too much rain could be a bad thing for the soybean crop as we just witnessed in Argentina. This will be something to keep an eye on, but it is early to get too excited about it. Disease issues are popping up, but at this point the benefit from the rains likely out weigh the damage.
In the near-term it is hard to imagine that soybeans will not fall under some harvest pressure. Like last year producers look at the soybean prices as being favorable compared to corn and many need the cash flow. This means that there could be a lot of soybeans sold off the combine again this year which could add some selling pressure to the market.
Longer-term however there is a case to be made for the bull camp. Unless demand is vastly overstated, which most years we are underestimating demand at this time of year, or the national average yield is a new record by more than 2 bushels an acre (4.2%) there is a scenario where the US could "run out" of soybeans if there was a South American weather problem. In the last few years demand has grown so quickly that the world needs to continue to produce record crops to keep up. In the last three years production has been hitting on almost all cylinders (bigger yields and acreage) yet the global ending stocks havedeclined.
When I look at a calendar that says early September it seems to be a strange time for grain markets to be rallying. Typically this only happens in years that (end in 6, Ha! kidding) there has been a production issue. This year the crop looks good, the question is how good? While it is true that harvest lows have a tendency to come early on years of big production it seem that a September1st low may be on the side of very early. Going forward -weather, yields and demand will guide the market and while I do think soybeans have a shot at higher prices I wonder if we might still yet see some harvest pressure first. Then again, we trade "futures" not "todays".
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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.
DecemberCorn Daily chart:
NovemberSoybeans 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 email@example.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.