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June 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.

Markets Brace for the USDA Report as Wheat Makes New Lows

Jun 27, 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.        

This USDA report on June 28th is shaping up to be one of the biggest reports of the year.  It will likely set the tone for months to come.  In front of the report corn and soybeans were mixed and choppy with some strength in old crop July contracts and weakness in new crop.  Wheat set new lows for the year amidst spring wheat harvest pressure and lack of bullish fodder.  The report tomorrow will address to burning questions in the market - Old crop supply and demand, and new crop acreage.  

The USDA will release quarterly grain stocks which will tell us two things - 1)  how much corn, wheat and soybeans we have until we harvest the new crop.  2)  how strong demand has been in last quarter.  This is more of a big deal this year then in most because of the major drought last year.  With the issues growing the crop last year markets pushed to new record highs on thoughts of historically tight balance sheets and the need to price ration.  Since then however, it seems demand has fallen apart and suggested that the record high prices price rationed better then anticipated.  Tomorrows report will give us a much better picture of where we stand going into the last quarter of the marketing season and give us an idea of whether markets need to rally to slow demand or fall to encourage more demand.  Cash prices have been strong for corn and soybeans as producers have been unwilling to sell at current prices.  This report will either justify them if stocks are tighter then expected, or possibly cause a sharp uptick in cash sales if stocks are higher then expected.  

The USDA will also release planted acreage numbers which will give us insight into the potential supply situation for next year.  This is also more of a big deal this year then most as most of the grain belt has seen a cool temps, excessive moisture and late planting.  It is mostly agreed that there have been some acres that have gone unplanted, mostly at the expense of corn.  The argument lies in how many acres did not or will not get planted, and if soybeans gained or lost acreage in the mix.  Once the USDA releases their planted acreage number it will be the number they use until the final harvest report in November.  Market participants can and this time certainly will argue with the numbers the USDA lays out, but the fact of the matter will be that these numbers are what the market will have to trade until after harvest, and these numbers will be what the USDA bases its balance sheets off of for months to come.  

One way or another this report should be a market mover.  If I had to take a guess, gun to my head, I would think that this report might not be as bearish as expectations but still represent bearish numbers long term.  It seems to me that there are so many bearish ideas out there for this report that maybe it ends up not being as bad as our worst fears.  Keep in mind that the last stocks report came out 400 million bushels higher for corn and sent the market on a mission to push limit down for the next 3 trade sessions.  Traders remember that, and I think there has been a lot of covering of long positions in front of this report and maybe some overly bearish expectations.  If there is not a big bearish surprise then there could be a bit of a relief rally short term, but in the end I do believe the USDA puts out numbers that add up to bigger old crop ending stocks and potentially huge new crop ending stocks.  

We are holding on to short hedges and adding some low cost short term upside protection.  This also adds exposure to the Sep-Dec spreads which could widen significantly to the Sep on a rally.  With late planting we would assume harvest delays could push the September contract more toward old crop fundamentals.  If this is the case the $.34 premium in September over December could move closer to the relationship of July - December which is at almost $1.30.  Feel free to call or email me if you would like more details.

December Corn Daily chart:

November Soybeans Daily chart:

December Wheat 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 corn near $5.50 and soybeans near $13.00. 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. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

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=tseifrie

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

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

Soybeans Show Hints of Strength as Corn and Wheat Act Weak

Jun 25, 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 have enjoyed a nice 2 day bounce off of recent lows driven by strength in the July contract.  Corn and Wheat on the other hand have seen flat to weak price action.  We have to wonder if soybeans were not holding strength if corn and wheat would lead the way lower.  

July soybeans have stayed strong going in to delivery period on the idea that commercials could be using the board to source soybeans at a discount to basis. This means that potentially the big end users who already have terminals at the delivery points may be buying soybeans on the futures board with the intention of taking delivery because futures prices are still lower then cash prices.  This situation can turn into what is called a short squeeze where entities that can and would take physical delivery will hold onto long futures positions until the price is at or above cash prices. This puts the speculators that held onto short positions going into the delivery period in a bad spot.  They do not intend to actually deliver grain so they must buy futures back however there are no willing sellers until prices are significantly higher.  

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

The strength in soybeans the last two days may be lending support to corn and wheat as well.  Aside form the strength in soybeans, corn and wheat have had weak price action.  Corn has a lack of bullish news to get the bull camp excited at the moment and weather looks good for the foreseeable future.  The spring wheat harvest is putting pressure on wheat and has prices near lows.  The good news I suppose is that the strength in soybeans may stick around at least until the report which could keep some support in corn and wheat.  

Strength in July soybeans will likely stick around for at least a day or two.  However the upcoming quarterly grain stocks report will have a big impact on direction going forward.  If the stocks number is bullish this could send july soybeans sharply higher.  If the stocks number is bearish this means that there are more soybeans around then we thought and this would put significant pressure on cash prices which for reasons stated above would also put significant pressure on the July futures prices.  

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

This USDA report on June 28th is shaping up to be one of the biggest reports of the year.  It will likely set the tone for months to come.   December Corn Daily chart:

November Soybeans Daily chart:

December Wheat 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 corn near $5.50 and soybeans near $13.00. 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. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

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=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.

This is Bigger then the Grain Markets

Jun 20, 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.      

It has been a wild week, for grains and just about everything else too.  As I write this stocks, metals, energies and just about everything except the US$ are down substantially.  This comes after 3 days of very strong fund buying especially in the December corn.  So what exactly is going on?  

On Tuesday July corn closed the gap left in the wake of the last USDA quarterly grain stocks report.  On Wednesday December corn closed at it's highest point since March 27th.  Since then corn has given back a good portion of the gains.  The sharp gains have been linked to aggressive fund buying especially in the December corn.  But why?  Fundamentals have not really changed this week.  If anything you could argue that the fundamental makeup of the corn market has gotten a bit more bearish this week with weather looking ideal for the foreseeable future and acreage estimates coming out better then our worst fears.  In spite of all this the funds decided they needed to be long new crop corn.  This is likely due to things going on in everything except for corn.  As funds have grown more and more nervous about being long the equities, metals, and energy markets they have looked for other places to hide away their money.   

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

Many times funds look for a market with mixed fundamentals, a sideways to higher technical set up and in particular something that is near the low end of its range.  Corn really fit the bill for this one.  And you have to imagine that last year's push to record high prices is also a motivating factor.  So what do you get when the funds need to move a lot of money in a short period of time regardless of the current fundamental news of any particular market?  And what happens when the market they choose is choppy and lower volume because of a huge upcoming report?  Apparently you get a 50 cent rally off of recent lows.  

Ok, so the funds wanted to buy corn and nobody saw it coming.  There really was no rhyme or reason for this in the grains markets it was all coming from outside factors which made it very hard to predict or understand.  But, now that the funds have done what they wanted to do has this changed the direction of the corn market?  Maybe, but probably not.  Granted we are only one day removed, but it seems that the funds that were buying like crazy the last 3 days are done at least for now.  This leaves grain markets with going back to trade fundamentals, which seem bearish.  There is also the matter of a huge USDA report on June 28th that has the potential to be very bearish.  If anything we may look back at this and see that this was a gift.  In the end I really feel this may have been a wonderful opportunity to sell higher prices.   

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

December Corn Daily chart:

November Soybeans Daily chart:

December Wheat 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 corn near $5.50 and soybeans near $13.00. 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. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

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=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

Why is This Year Different then Last Year for the Grains?

Jun 18, 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.      

The obvious differences from one year to the next are plenty.  We could talk about the weather and how last years record planting pace was followed this year by a record slow pace.  We could talk about how much rain we have had this year after a major drought last year.  We could talk about how demand has fallen in the last 12 months.  These are all very important factors to the market and shape the current market climate.  But aside from the obvious differences, I have been thinking about a less obvious one and that is trader/analyst mentality.  

Around this time last year everyone, and I mean everyone was very bearish.  We had an unseasonably warm spring and a had planted crops at a record pace not to mention on huge acreage.  We were expecting a huge crop with huge yields on huge acreage.  We were expecting over a 2 billion bushel carryover for corn which we had not seen in some time.  Then...  Well, we all know what happened.  I didn't rain in 3 months and crops were tortured by scorching heat.   

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

The point of this exercise is to highlight that last year the market had been so one sided and in particular so bearish that when the drought set in we all got caught off guard.  Yes, some of us sniffed it out a week or two in advance and purchased some calls to protect our short positions but none of us could have known this time last year that we would see record high prices.  We were all waiting for it to rain and expected the markets to make new lows.  But when a market gets so caught off guard like that it turns into a violent move as stops get hit, new positions are taken and speculators come out of the woodwork to join the party.  Doctors and lawyers and even cab drivers read something from wallstreet and then proceed to look for ways to get in on the action.  

This year is a different animal.  There are very polarized opinions on the markets today.  There are arguments over what did and what did not get planted.  There are arguments over yield potential of late planted crops in near ideal weather.  And, there are arguments over the current demand structure. So much so that we see these arguments play out on the board every day in the form of choppy, two-sided trade.  When something happens, and it will, there will not be as many of us caught of guard.  And it would take another major weather issue to push prices to new record highs after we saw how quickly and easily demand was rationed last year.  

The input for change very well may be the upcoming USDA reports on June 28th.  These reports will answer some of the burning questions out there such as acreage and demand for last quarter and will likely set the tone of the markets for months to come.  It seems the June 28th reports are becoming some of the most important of the year.  But, the market seems to be in a much healthier position coming into this and prepared to take any swings in stride.  There will be buyers, there will be sellers and some will get caught off guard and some will say I told you so but this year we are not all leaning on the same fence.  

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

December Corn Daily chart:

November Soybeans Daily chart:

December Wheat 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 corn near $5.50 and soybeans near $13.00. 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. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

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=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.

Why We Should Just Throw Out this USDA Report

Jun 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.      

There were lots of question marks coming into the June USDA WASDE report.  With the release of this report it seems there are now more questions rather then answers.  As it turns out, the June 28th stocks and acreage report is going to be the bigger deal this month and may even be the biggest report of the year.  

Leading up to this June USDA report there was lots of talk about the USDA making changes to planted and harvested acreage numbers.  This did not make much sense to me as the USDA does not make acreage adjustments on this report.  Needless to say they did not change acreage numbers.  And, this is where the problem with this report lies.  Acreage is the biggest question mark of all at the moment.  With late planting is has become fairly clear that there will be at least some corn acreage lost to preventive planting and possibly some soybean acreage as well.  This will have a large impact on the balance sheet, but not this month.  

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

So now we are left with trying to figure out how many acres will be lost.  We can all speculate as to where the USDA will settle on the June 28th report, but for now that is all it is - speculation.  And, the USDA has a tendency and/or history of putting out numbers that do not make much sense to those of us who think we know better.  This certainly sets the stage for a huge report when the USDA does finally weigh in on the late planting situation.  

The lack of revised acreage numbers was not the only thing lacking from this report.  There was also very little change in the old crop balance sheets.  It now seems obvious that the USDA did not want to make any major changes before the Quarterly Grain Stocks report.  Also on June 28th, this will give us a much better insight to the supply of old crop grain as we go into the last leg of old crop and a firm gauge on demand in the last few months.  This report will also be highly anticipated and has the potential to be a big market mover due to the tight old crop stocks situation.  

All in all this report garnered a bearish reaction because the USDA did not lower acreage numbers and the carry over numbers were bigger then expected because of that.  But in reality not much has changed since before the report was released.  The USDA made very little change to last month's balance sheets.  The acreage situation will still be a dominant feature of the market for bulls and bears to battle out.  Bears can point to the lower feed demand and say this will be a trend and will offset slightly lower acreage numbers.  Bulls will argue that the lower yield number will be a trend and will significantly tighten the balance sheet when the USDA does in fact lower acreage numbers.  Which ever side of the fence you fall on this report leaves in its wake more questions then answers.  

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

I am out of the office until Friday, which is why I am posting outside my normal times this week.  I will be back to the normal routine next week.  But please feel free to give me a call if you would like to talk about markets or your marketing plan.  Have phone will travel...    December Corn Daily chart:

November Soybeans Daily chart:

December Wheat 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 corn near $5.50 and soybeans near $13.00. 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. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

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=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.

How will Lost Acres Effect the New Crop Corn Balance Sheet?

Jun 06, 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.      

Volatility has been high in the corn market as we attempt to determine how many acres could be lost to this wet start and late planting.  As we try to determine how many acres could be lost I think it is a good idea to look at the current USDA balance sheet and come up with a few different scenarios while keeping the demand structure and yield estimate unchanged.  Yield is a big if at this point, but with crop conditions at 63% good to excellent in corn we are on pace to hit the USDA estimate.  Demand numbers are a big if as well, and many would agree that some of the current USDA projections are much too high.  

The USDA is currently looking for 89.5 million Harvested Acres in corn with a 158 bushel per acre Yield.  Under their current demand structure that works out to a 2.004 billion bushel carry over.  But it seems very likely that acreage numbers will be coming down, so we worked out ending stocks numbers based on a 2,3,4,5 and 6 million acre reductions in harvested acreage.  They are as follows:  

87.5 Million Harvested Acres (reduction of 2 mill) = 1.689 Billion bushel carry over  

86.5 Million Harvested Acres (reduction of 3 mill) = 1.531 Billion bushel carry over  

85.5 Million Harvested Acres (reduction of 4 mill) = 1.373 Billion bushel carry over  

84.5 Million Harvested Acres (reduction of 5 mill) = 1.215 Billion bushel carry over  

83.5 Million Harvested Acres (reduction of 6 mill) = 1.057 Billion bushel carry over  

Keep in mind, these are harvested acreage numbers not planted acreage numbers.  We did this because we feel that the percent of harvested acres could go up this year.  Currently the USDA assumes that 92% of planted acreage will be harvested, we think that when all is said and done it could be closer to 94% this year.  But, even if we hold true the USDA's assumption of 92% this would mean a 6.55 million acre reduction in planted acres would be a 6 million reduction in harvested acres.  

I gotta say I'm having a hard time being bullish based on these numbers.  Using the same yields as the USDA (158) if we lost 6 million acres in harvested acreage (which translates into a much bigger loss in planted acreage) and kept the current USDA demand structure the same we would end up with a 1.057 billion bushel carry over!  I have to say, at this point that is the absolute worst case scenario for acreage, and it seems unrealistic to me.   

Furthermore, we feel the current USDA demand structure is much too high.  For example - How does the USDA justify a 925 million bushel increase in feed and residual?  Cattle on feed numbers are consistently disappointing, and there will be significantly more pasture this year.  Or, a 310 million bushel increase in Food, seed and industrial when ethanol numbers are consistently falling behind current USDA projections?  Or a 550 million increase in exports?  You get the picture. 

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

When all is said and done we feel like even if we lost 6.5 million planted acres in corn we could still end up with 1.4 million bushel carry over, and that's is with only a modest reduction in feed (down 350 million to 4,995 which is still well above 2012/2013 at 4,400 and 2011/2012 at 4,545) and I left exports and ethanol unchanged even though I could build a very strong case for them being way too high as well.  

From talking to clients I cant imagine it being as bad as our worst fears.  I am having a hard time finding many producers that haven't been able to plant anything.  Between me and my other 3 guys who work for me we only have a handful or two of guys that have yet to plant corn (In Iowa, Minnesota and North Dakota) and aside from guys in the very northern areas they are still expecting to get corn planted.  As far as conditions are concerned my guys do not seem to be worried at this point, they want heat units but feel that will come.  Development may be slow, but guys feel conditions are ideal going into the warmer months.  

Make no mistake about it, markets will be very sensitive to weather this year.  Acreage reductions put huge pressure on yield performance.  Everything we talked about above is based on hitting the USDA's target yield of 158 bushels an acre, but if weather issues start to cut into that yield production numbers will drop fast.  It might be true that a good amount of the acreage lost will be fringe acreage and therefore raise the average yield potential, but weather will need to agree.  If there are issues similar to next year look out for new highs.  

On another note, I think that is really interesting that hedge funds are so bullish.  I suppose I could go both ways on that:  on one hand it seems that the speculators are always the most bullish at the top and most bearish at the bottom, on the other hand I would assume that these guys pay a lot for the research they are getting.  That being said, if the large speculator mentality is bullish they could certainly push prices higher in the short term as I do not see a whole lot of producer selling at the moment.  However, I have to say that so far it has been disappointing to the bulls that after a 30 cent drop in corn in 3 days we can not muster more then a 6 cent bounce off this gap.  Price action seems to be dominated by spreads at the moment but overall feels week.  

We are set up for a wild month now with Monday's crop progress report being a huge deal, then we have our monthly USDA report on Wednesday and then what might be the biggest report of the year in the June 28th stocks and acreage reports.  In the mean time we will continue to trade as a weather market.  So, buckle up right? 

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

Situations like these are exactly why we always consider different strategies when marketing.  Sometimes futures make sense, and sometimes option strategies that leave upside potential open or partially open make sense.  If you are looking for ideas or want to talk strategy feel free to give me a call or shoot me an email, you will find my contact info below.

December Corn Daily chart:

November Soybeans Daily chart:

December Wheat 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 corn near $7.00 and soybeans near $14.00. 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. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

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=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.

Corn and Soybeans Fall Under Pressure, but is the Rally Over?

Jun 04, 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.      

Corn and soybeans have been very strong in the last two weeks due to concerns about getting the crop planted and fears of shrinking production.  The rally has cooled off lately as better (but still not great) weather may offer some planting opportunities and planting progress has reached 91% in corn and 57% in soybeans.  So was that it for the rally?  Are the concerns behind us now?  

In the short term I really think this is not the end of the strength.  In weather markets, which this most certainly is, volatility is very high as we hang on every weather forecast.  It wouldn't take much of a change to get back toward highs.  Realistically I think we could have 2 more weeks of this planting market.  However, if there is a big jump in soybean planting this week that would go a long way to soothing concerns.  

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

Longer term I have to wonder.  I certainly understand that there are acres that will be lost to pp.  However things are almost never as bad as they seem in the moment.  The rally to record prices last summer were a great example, we grew a much bigger crop then our worst fears.  On the same note, all the talk about 4-9 million acres lost will probably end up being excessive.  And, if this weather keeps up yields have a good shot at beating trendline for whatever has been planted.  

I also have to wonder if the USDA would actually show a 6-9 million acre reduction in planted acreage.  Something tells me they would take a much more conservative approach and use the yield and residual numbers to play their math games.  

Either way, we are in store for a few more months of a weather market.  After last year we are very sensitive to any hiccups on those weather forecasts.  But what if the weather is perfect from here on out?  It seems unlikely, but I guess we have to consider that as a possibility.  If that is the case this could be/have been our weather rally to sell.  I think it would be strange to put in highs in June, but as we all know markets do their best to trick us.  Wouldn't it be something if corn and beans rallied into the last stages of planting to encourage producers to get the crop in the ground on ideas of another year of great prices only to fall apart later?  

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

Situations like these are exactly why we always consider different strategies when marketing.  Sometimes futures make sense, and sometimes option strategies that leave upside potential open or partially open make sense.  If you are looking for ideas or want to talk strategy feel free to give me a call or shoot me an email, you will find my contact info below.

December Corn Daily chart:

November Soybeans Daily chart:

December Wheat 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 corn near $7.00 and soybeans near $14.00. 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. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

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=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.

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