The Ted Spread
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.
Expectations for the USDA Grain Stocks Report
Sep 27, 2012
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Grains softened again today as the trade braces for the USDA Quarterly Grain Stocks report tomorrow AM. Corn was down 8 1/2 cents to 716 1/4 and soybeans were down 2 1/4 to 1570 3/4. The day started with strength in soybeans coming from news that china had bot 2 cargos of US beans, however the bullish china buying enthusiasm faded through the day as traders started to talk about China using current prices to cover immediate needs but waiting for South American beans for future purchases.
Tomorrow's Stocks Report is a bit of a wild card. I can make a strong case for this report to come out on either side of expectations. On one hand i think that the actual grain stocks could be well below trade estimates, which would be very bullish for grain prices. On the other hand I have to acknowledge who this report is coming from and with the USDA aggressively cutting demand the last 3 Monthly reports I have to wonder if their grain stocks numbers will need to reflect that in order to justify their significant changes in demand. I can not say and will never know if the USDA is giving us truly factual numbers or just giving us what they want us to see, but the fact remains that at the end of the day this is what we have to trade.
CME Options On Futures: The Basics: http://www.zaner.com/offers/?page=9&ap=tseifrie
Overall, I can see the need for a technical bounce in grains. We have momentum studies showing a extreme oversold condition in corn and soybeans (not so in wheat), and the sell off highs has extended to the lower limits of Bollinger bands. A bounce back to support could be coming down the line soon. However, I can not comfortably say that I would be waiting for a bounce to extend hedge protection because prices are good and it certainly is possible that the bounce doesn't happen until we are at much lower prices. For now we have big downside targets in both corn and soybeans in the form of chart gaps that occurred over the 4th of July holiday. For December corn the gap is between 685 and 676, for November soybeans the gap is 1493 to 1478.
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Here are the trade expectations for the September 1st 2012 USDA Quarterly Grain Stock report tomorrow:
* For corn the average trade guess is 1.128 billion bushels with a range of 887million to 1.261 billion compared to 1.128 billion last year.
* For soybeans the average trade guess is 131 million bushels with a range of 110 million to 152 million compared to 215 million last year.
* For wheat the average trade guess is 2.278 billion bushels with a range of 2.159 billion to 2.533 billion compared to 2.147 billion last year.
December Corn Daily chart:
November Soybeans 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 new crop corn above $7.00 and new crop soybeans above $15.00. 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.
Ted Seifried (312) 277-0113 or firstname.lastname@example.org
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=Seifried
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