Sep 1, 2014
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December 2013 Archive for The Ted Spread

RSS By: Ted Seifried, AgWeb.com

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.

Is the Party Over for Soybeans?

Dec 26, 2013

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.        

Soybeans were under pressure after the holiday.  March soybeans were down 17 1/2 cents and posted the lowest close since December 3rd, narrowly missing the lowest close since November 21st.  Are soybeans ready to break out of this trade range?  

South American weather has been and will continue to be a major driving factor for soybeans.  Brazil, for the most part looks pretty good but recently concerns have grown over hot and dry conditions in Argentina.  Over the last few days more rain has been added into the forecast for Argentina, but hot and dry conditions continue to linger in some of the longer term forecast models.  The added precip weighed on soybean prices today, but if Argentina were to miss out on the advertised rain or if they return to an extended hot and dry period after the rain soybean prices could return to highs.  So, beans are under pressure from the rain in the forecast, but we may not be out of this weather market yet.  

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

Export sales are the other major driving factor for soybeans.  Last week we saw export sales partially offset by 576,300 MT of cancellations resulting in 415,500 MT for 2013/2014.  This was down 64% from the previous week average and a new marketing year low.  The question remains - how much of the unshipped sales on the books will get canceled (especially by China)?  South American weather is a major factor here too.  If weather is good in South America and the outlook is for a big crop we could see countries canceling US business and buying South American soybeans.  This could mean a bigger US carry over and lower prices.  As we are seeing in corn right now, China will find a way to cancel shipments if they feel they can get better prices or have overbooked their needs.  

Going forward soybean price direction is dependent on South American weather and how the export sales/shipments situation plays out.  If SA weather looks good and cancellations look evident soybeans could see lower to sharply lower prices.  Tomorrow we will see how export sales fared during the holiday and if countries are comfortable enough with SA weather to cancel shipments.  Then we will watch Argentina very closely this weekend into next week to see if they get the advertised rains and what their forecast looks like for the weeks to come.  So, the party may not be over for soybeans just yet, but it might be last call.  

Have a safe and Happy Holiday everyone!  

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

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.     

March Corn Daily chart:

March Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. 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

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

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

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.

What are China's Plans for the Holiday?

Dec 19, 2013

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.        

At times it has been suggested that China likes to manipulate grains markets to their advantage (you don't say?)  And, the times that it is easiest to do so are thinly traded holiday sessions.  So, as we get set to spend some quality time with our families I wonder what China's plans are.  

Is China going to swing by my house for Christmas?  Only if I make the Ham you say?  I jest, but actually I did have a Chinese exchange student at my house for thanksgiving.  On black Friday he went and bought 82 pairs of Nike shoes to take home and sell to his classmates.  Ever the opportunists I thought to myself.  Its a big part of the culture.  So now I'm wondering what sort of opportunities China is looking to capitalize on during the next two holiday weeks.  

It would occur to me, that if I was devious enough and in a position to do so, I could put on a massive futures and/or options position and then make some sort of announcement to make the market go in my favor.  It would certainly be easier to do this in lower volume, choppy markets.  So, If you are a big soybean trader in China you might be thinking to yourself - "the South American weather looks favorable, so I am going to sell soybeans, sell calls, buy puts and then announce that I am canceling 30 cargoes of US soybeans and see if the market breaks 30-40 cents".  Hmmm, again if I were so inclined and in a position to do something of this nature I suppose I would be dreaming sweet dreams thinking about the weeks to come.  

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

Now some people would say if this were to happen it would be almost criminal.  In reality it's not.  Personally, I have absolutely nothing against China.  If anything I would like to say thank you for buying so much of our grain.  However, I do recognize some of the differences in our cultures.  There is really no right or wrong here, just differences in culturally acceptable practices.  It's best not to fight over which culture is better or more just.  Everyone is obviously going to be more partial to their own.  Its better to understand other cultures and prepare for how they may act.  

Have a safe and Happy Holiday everyone!  

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.     

March Corn Daily chart:

January Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. 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

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

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

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.

Hey China, Is the Low in for Corn?

Dec 17, 2013

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.        

Grains pricing is seemingly so dependent on China these days, and once again China may hold the key for price direction in corn.  Recently, March corn has found strong support at $4.20.  In the last 30 days March corn has tested lows three times and on all three occasions has failed to post a close below the key $4.20 level.  Now, corn has a potential triple bottom in place, but the China GMO situation may ultimately decide corn's fate.  

Since November 18th, March corn has tested the $4.20 level three times and all three times has come back strong. From a technical perspective corn may now have a triple bottom formation in place.  Furthermore, corn has broken the neat and tidy mid-term downtrend line it had been following closely since the beginning of September and has seen the 9-day moving average cross above the 20-day moving average for the first time in three months.  All this could be suggesting that corn might be done going down for now.   

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

Fundamentally a lot has changed since corn first tested the $4.20 level back on November 18th.  The USDA ending stocks projection (while still a big number) has come down 95 million bushels on the back of strong export and ethanol demand.  Ethanol in particular has been a positive for corn.  Profit margins are good, production is strong and stocks are low despite the EPA proposing to ease the mandate.  Relatively high crude/gas prices and low corn prices seem to be a winning formula for corn used for ethanol.  Exports have been positive too, at least until China decided to refuse some cargoes (7-12 of both corn and DDGs) on the grounds of finding an unapproved GMO strain.  Coincidentally (or maybe not) China's corn production has been coming in better then expected.   

So the question is - are the refusals of corn and DDG cargoes isolated incidences or is China looking for reasons to cancel shipments?  If China stops buying US corn or begins to refuse US corn and DDG cargoes on a bigger scale then corn prices may need to go significantly lower to bring back demand.  However, if these refused cargoes have been "one off" situations and China continues to by US corn then the worst news in corn may be behind us for now.  Again, it is important to temper any expectations for a strong rally in corn because stocks are still large but it could be possible that corn prices drift higher until spring - that is if China doesn't ruin everything.  

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

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.     

March Corn Daily chart:

January Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. 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

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

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

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.

The USDA's Stand on Soybean Exports

Dec 12, 2013

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.        

On the December USDA WASDE report the USDA had a tough call to make regarding the soybean export situation.  The way they chose to handle it was interesting and could offer insight for reports to come.  

For weeks now we have been talking about how the soybean export situation is making it difficult to determine short and long term direction of the market.  On one hand export sales are 330 million bushels higher then this time last year and at a record pace.  As of next week soybean export sales will likely have already hit the USDA projection for the current marketing year even though we are only 4 months in.  On the other hand the latest USDA data shows that export shipments are only 53 million bushels ahead of last year compared to the 330 million bushel increase in sales.  The concern here is that some of the 725 million bushels in sales that have not shipped yet may get canceled if South America continues to have favorable conditions.  

Leading up to the December WASDE report there was a lot of talk about how the USDA would handle this situation.  Some suggested they should raise exports aggressively while others suggested they should leave exports unchanged until shipments begin to catch up with sales.  The way they did handle it was interesting and might give us a clue on how they will act on coming reports.  

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

On the December WASDE report the USDA increased exports by a modest 25 million bushels.  This was probably enough of an increase to buy more time to see how the sales/shipments scenario plays out.  At the same time the USDA increased US imports by 10 million bushels.  I'm not sure that anyone saw that coming.  Basically what the USDA is saying is that with the highest projected world stocks number in over 3 years the US may start importing soybeans from South America early next spring to offset the higher sales demand we are seeing now.  

What this means is that on future reports the USDA could continue to increase exports but they may increase imports as well.  I suppose it is also possible that the USDA could increase imports and leave exports unchanged at some point.  Either way by raising imports, even by only 10 million bushels, the USDA has taken some of the steam out of the bulls sails.  The fear of running out of soybeans this year is soothed by the prospect of large world stocks and US imports.  It seems pretty clear now that the USDA is not going to dramatically tighten the soybean balance sheet unless there are major issues with South American production.

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

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.     

March Corn Daily chart:

January Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. 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

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

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

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.

December USDA WASDE Report Preview

Dec 05, 2013

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.        

On Tuesday December 10th the USDA will issue fresh domestic and world supply and demand estimates.  Many burning questions about US production figures were addressed in the November report but the December report will focus more on the demand side of the US balance sheet as well as world production estimates. The biggest question will be how the USDA handles the soybean export situation.  

Corn could have a fairly quiet report.  Export and ethanol demand has been good to start the marketing year and the USDA could choose to increase demand in one or both of those categories.  Feed demand could need to be moved higher at some point as well as an arctic cold blast takes hold of the nation and sparks the need to increase feed but it may be too early to tell if this cold blast is a one off situation or if we are in store for a colder then normal winter.  World production and carry over numbers will be looked at as well.  US and World carry over numbers could come down as global demand slowly increases at lower prices, but neither the US or global balance sheet will be in a tight situation.  This USDA will not likely trigger a bull market in corn, but may rather allow for higher prices in the short to mid term as the biggest USDA carry over estimates may be behind us at this point.  It is important to temper expectations for higher corn prices however.  Short of a major production issue next US growing season corn prices could still need to stay low for some time to encourage demand.  

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

As far as wheat is concerned the trade will be focused on South American production.  A wet spring for Brazil and Argentina has caused some quality concerns for wheat and has suggested that there may be a bigger need for US exports to fill the void.  If this were the case it could cause domestic prices to rise until South America's needs are met.  On a global scale ending stocks could come down due to lower South American production but global ending stocks are still very large.  

Soybeans may have the most interesting report on Tuesday.  Export sales have been on record pace to start this marketing year.  On the November WASDE report the USDA increased export demand by 80 million bushels to 1.4 billion.  As of the last export sales report we will see before this report sales had reached 1.381 billion bushels for the current marketing year.  Seeing that the marketing year just started in September this would suggest that exports are going to blow the doors off the current USDA estimate.  In fact we are now only 18.7 million bushels in sales away from hitting the current USDA mark.  Considering that we have been averaging nearly 50 million bushels a week in sales (not including the Thanksgiving holiday week) we likely will have sold more then the current USDA projection by next week, and it would only take 4-5 weeks to sell the other 170 million bushels the USDA is estimating for ending stocks.  This would suggest that if all of the sales on the books were delivered the US could very well run out of soybeans this year and would also suggest that sharply higher prices are needed to price ration demand.  

On the other hand, export shipments for soybeans so far have been 635 million bushels compared to 602 million at this time last year.  The 33 million bushel increase in shipments year over year could suggest that the USDA is right on or even slightly high on their current export estimate.  The key will be how the USDA sees this export sales/shipments relationship and what they do with their demand figure.  It is very possible that a good amount to the sales we have seen this year are other countries "hedging" the South American crop and will likely cancel or redirect shipments.  

This puts soybeans and the USDA in an awkward position.  You could certainly make the argument that the USDA should show a sharp increase in export demand and a sharp decrease in ending stocks.  This would likely trigger higher prices as well and could slow the current sales pace.  However, you could also argue that the South American crop looks good right now and that shipments are lagging behind the record pace of sales suggests cancellations down the road.  So if the USDA increases export demand and tightens the US balance sheet it could be setting the market up for failure down the road, if they do not increase exports and export sales stay strong then the US could run out of soybeans if South America has a major issue with production.  So, I would not want to be the USDA right now (or anytime really), but if it were me I might just punt till next month.      

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

Zaner Ag Hedge Dec WASDE estimates:  

US Ending Stocks (Billions of Bushels)  

Corn - 1.862

Wheat - 0.551

Soybeans - 0.170  

Global Ending Stocks (Millions of metric tonnes)  

Corn - 163.2

Wheat - 176.3

Soybeans - 72.4  

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.     

March Corn Daily chart:

January Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. 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

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

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

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.

Is Corn Showing Signs of Life?

Dec 03, 2013

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.        

March corn set new contract lows to start the week, but was unable to extend losses and has now bounced back to post a somewhat rare close over the 9-day moving average.  What is more is that there is a case to be made that corn may now have a near term double bottom in place.  While it seems unlikely that corn is going to transition into a strong bull market is it possible that the lows may be in for now?  

From a technical standpoint the inability of corn to follow through on new lows may be a positive development.  At the time corn was oversold but it was not an extreme case where we would expect to see a corrective bounce.  In fact, the RSI or Relative Strength Index had been much lower in recent history and was only at 38% after 2 weeks of mostly sideways trade.  For sake of comparison the RSI was at 29% last time corn made new contract lows on November 18th.  This suggests that this bounce off of lows might be more then just a technical corrective bounce.  There is also a chance that corn now has a double bottom formation.  The lows from November 19th and December 2nd are within 1 1/2 cents of each other and both times March corn has rebounded well off of the $4.20 level.  Corn now faces the daunting task of closing above the 20-day moving average which has not been done in convincing fashion since late August.  However, if corn can muster and sustain a bit more strength from current levels a healthy amount of short covering may follow.  

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

From a fundamental standpoint corn has little reason to transition to a bull market, but there is also a chance that most of the worst news is behind us for now.  For the last few months there has been talk of a bigger then expected corn crop and bigger then expected ending stocks.  Now that the corn market has had some time to absorb the harvest and the bushels that were sold off the combine producers may begin to hold on tight to remaining stocks.  This could cause basis to increase and could offer support to futures.  Demand has also started to come back at current price levels.  Ethanol production and export sales are much better then this time last year.  Low prices were and still are needed to continue to encourage demand but at this point corn may want to test the upside to see how sensitive demand is to increases in price.  Demand could drop sharply if corn were to rally too far too fast so it is important to temper expectations for higher prices, but corn may want to test its boundaries in the coming weeks.  

 I have argued the bull case for corn in recent articles however the technicals have not been there to support it.  The technical picture could be getting better at this point, but fundamentally corn is still on a bit of shaky ground.  The massive ending stocks that the USDA is currently projecting could inhibit corn from a longer term rally and corn may still need to make new lows at some point in the marketing year to encourage more demand.  For now however, corn could be setting up to see how higher prices effect exports, ethanol and feed demand.  

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

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.     

March Corn Daily chart:

January Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. 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

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

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

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.

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