Sep 22, 2014
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July 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.

At What Point do We Start to Worry About an Early Frost?

Jul 30, 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 strange growing season indeed.  We saw a cold, wet spring turn into a hot and dry June and early July.  Then the second half of July saw a return to a wetter pattern along with much cooler temps that flirted with record lows and even produced some frost in the northern extremes of the growing area.  As we turn the page on July we wonder what then next few months will bring.  

A cold an wet spring did two things.  One, it recharged sub soil moisture levels in most areas after a sever drought last year. Two, it caused massive planting delays.  So, it was a bit of a bitter sweet spring.  After a near record slow planting pace the concern was that key moisture sensitive stages of corn and soybeans would be pushed back into the thick of the hottest temps of the year.  So far, that has certainly not been the case but at what point do we start to get worried about below normal temps?  

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

At the moment below normal temps are just what the doctor ordered as some areas are a little too dry.  This is significantly helping in corn pollination and to ease the mounting stress for those of us who have missed on the recent rains.  But with planting delays putting crops behind the normal pace shouldn't we be concerned that an early frost might wipe out a large portion of production?  It is conceivable that well over a billion bushels of corn could be lost and 300-400 million bushels of soybeans depending on how early and widespread a frost would be.  

So far grain markets have not reacted to below normal temperatures in July as a threat.  It is probably too early for markets to get too excited about as for the moment the cooler temps are helping the crop.  But with markets being so sensitive to weather it would seem to make sense that at some point concern should build.  Now, it is important to note that at the moment that the forecasts suggest warmer temps in August.  And, many weather forecasters suggest that the chance of an early frost is low (10% or less).  But still, the impact of an early frost would be so huge that cooler temps might be a concern especially with late planting extending the growing season in many areas.  

At this point we are not looking for a big rally in corn and soybeans on the basis of cool temps.  We are however wondering it this could start to support markets and keep them from another sharp leg lower.  From a technical perspective corn and soybeans might be ripe for a bounce anyway.  Regardless, it seems that the weather market is far from over and it will be important to closely follow weather forecasts for months to come.  

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.   

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.

Is it Time to be Aggressive?

Jul 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.        

It has been an ugly week for the grains, especially the August soybeans.  But is it just gloom and doom for grain prices from here on out?  

It is likely that the trend for grains will continue to be lower as long as weather agrees.  Old crop basis has been supporting grains for some time and if you take that out of the equation it allows for lower prices.  However, the extent of the selloff, especially in soybeans, is not likely to continue on this pace.  Many times when have a large move like we have seen in the last three days it lasts for three days.  So, we could be setting up for a bit of a bounce in the next few trading sessions.  

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

Weather is still an uncertain for soybean pod set and filling corn.  So there certainly could be more volatility in the weeks to come.  Weather for the most part looks better then it did last week before we got some rain and cooler temps and it does seem that the weather pattern has changed to a cooler wetter pattern.  But, there are still some dry areas out there and some stress will occur if they continue to miss out on rain.  

So, now is not a time to panic if you still have a lot of sales to make.  If you do still need to sell now is the time to pin the ears back and be aggressive on bounces.  Keep an eye on weather, but if things continue to look good selling bounces might be the best bet.  

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.   

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 Low can Corn, Wheat and Soybean Prices Go?

Jul 23, 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 is the burning question on everyone's mind.  I get asked this question in almost every conversation I have.  Clients, potential clients, news reporters and other analysts all want to know the answer.  Really, there is no cut and dry answer because there are so many factors at play.  Obviously grain fundamentals play a big part in determining price, but other things such as money flow and inflation/deflation play a part as well.  So, I explain that I do not have a crystal ball (pardon the cliche) and I do my best to predict the future.  In doing so I think there are a couple key ingredients that I have not heard much talk about and that I think will be big determining factors.  And, it may come as a surprise to some, but I'm not as bearish as most.  

First of all what we do know is what the USDA has to say about planted acreage, production, demand and ending stocks.  We might not agree with their opinion, but we have to live with it.  The fact of the matter is that the USDA is projecting very bearish numbers as of the July report and the market has responded to it.  Some feel that demand is overstated which is an even more bearish thought and some think the production numbers may be overstated which could shrink ending stocks a bit.  However you want to work it most analysts agree that we could be looking at big ending stocks.  

What we do not know for sure right now is average yield.  So far we have seen late planting due a cold and wet spring, a hot and dry spell and now some timely rains.  The key word there is some timely rains as not everyone has gotten their fair share.  However it does seem as that the weather pattern is getting back to cooler and wetter.  I do believe that the yield numbers the USDA gave us in the July report will need to come down, but I am not sure they need to be reduced dramatically.

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

What we really do not know is what will happen in outside markets and with global economies in the next year.  China economic numbers have been disappointing as of late, and the US is a big question mark in my mind.  The FED has put a lot of effort into creating inflation and while I do not agree with printing money to get out of a problem I do recognise that it has boosted futures markets as a whole.  Now, as the FED looks to wind down their printing the US dollar could be in a position to gain strength.  This could hurt US exports, encourage South American exports, and possibly even encourage US imports of South American grain.  This could also cause many of the funds to look to get out or even aggressively short commodities markets.  If on the other hand however the FED decides to start printing money again this could have a negative effect on the US dollar and give a big boost to futures, grains included.  I am not a betting man, but if I was I would take the side of the FED continuing to print money but really no one knows except Ben B. and his buddies.  

In many ways this sounds like an utterly bearish scenario, and to a point it is.  In fact these are many of the reasons corn, wheat and (to a lesser extent) soybeans have been in a down trend for some time.  Now, I have been called a "bearish idiot" many times since last September.  Fair enough and I do appreciate the feedback.  In my defence though, the markets have agreed with me.  But at this point I am getting less bearish as we push toward harvest.  This is for two key reasons.  

First, after a few years of mostly good profits for producers there has been a good amount of reinvestment back into the operation in the form of storage.  Many of the guys I talk to, the bigger operations in particular have had storage building projects in the last few years.  Here is where that may come to use.  On top of that many guys have or are in the process of clearing out their bins as prices have been good.  There probably will not be (rather shouldn't be) many bushels of corn or soybeans stored on farm by harvest.  This leave an opportunity to store lots of grain on a national scale.  Producers will likely hold on tight to stocks waiting for higher prices.  If this is done on a large enough scale it could cause a shortage in the cash market and push basis up and support futures prices.  Now, there will be producer selling on bounces to free up cash but this could aid in keeping prices from going to ultra low levels that some suggest.  

Second, crop insurance levels set last February are pretty good.  This could encourage storage, the canceling out of low yielding fields, and an overall sense of not wanting to sell anything under insurance levels.  This may sort of bail out futures prices to some extent this year.  It is very important to note however that this may not be the case next year.  

So, yes I have been guilty of being very bearish in for the last 9-10 months.  Not that that has really been a bad thing for most of my clients.  But at this point I might not be as bearish for 2012-2013 at the next guy.  I do think there is certainly more downside potential from here, and if called me and wanted to sell something I would encourage you.  But, my downside targets are not super low.  I do think corn will get to $4.45 by harvest.  I do think wheat will follow and get near $5.80.  And, I think that once soybeans get past the weather market they could take a shot at $10.50.  But that may be about it this year.  Next year is the year that scares me the most at this point.  Crop insurance levels could/should be at lower levels.  Storage bins could be overflowing.  Beginning stocks may be the largest in years.  So what happens if we have a decent crop next year?  Well, thats when we might be talking about ultra low prices.  The good news is that there are still opportunities to get some decent prices for next year if you know where to look.  

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.    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.

Possible Yield Scenarios for Corn

Jul 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.        

On the July USDA WASDE report the USDA stayed firm on corn yield at 156.5 bushels an acre. There has been some talk about that yield number being too high due to some hot and dry conditions in some areas during pollination.  So, we wanted to see how lower yield numbers would effect the balance sheet.  For now we are using the current USDA demand structure, harvested acreage number and beginning stocks.  

First off we would like to mention that currently the corn crop at 66% good to excellent and slightly above average so yield reductions may not be necessary if timely rains were to fall in the drier areas.  But, we wanted to see what would happen if the rains did not come.  So, we will start with a 2 bushel an acre reduction and work our way up to what we see as a worst case scenario 10% or 16 bushel an acre reduction.  Here are ending stocks numbers based on lower yield figures while leaving everything else unchanged:  

Current USDA Estimate - 156.5 Bu/acre = 1.959 billion bushel ending stocks

154.5 Bu/acre = 1.775 billion bushels

152.5 Bu/acre = 1.597 billion bushels

150.5 Bu/acre = 1.419 billion bushels

148.5 Bu/acre = 1.240 billion bushels  - This would represent a 5% reduction in yield

146.5 Bu/acre = 1.062 billion bushels

140.5 Bu/acre = 528 million bushels  - This would represent a 10% reduction in yield  

So, from these numbers we can see that even a 10 bushel an acre reduction in the national average yield would still result in over a billion bushel carry over given the current USDA balance sheet.  If we would see a full 10% reduction in yield ending stocks would cone in slightly over a half a billion.  This would most likely be the absolute worst case scenario and with corn conditions at 66% good to excellent as of July 15th it seems highly unlikely.  

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

Now, all of these possible scenarios are based on the current USDA harvested acreage number.  In July the USDA actually raised the planted acreage number by 100,000 acres which shocked the market.  Most felt that with the wet and cold spring a lot of acres did not get planted.  The USDA did however reduce harvested acreage by half a million acres reflecting weather conditions.  Some feel that the harvested acreage number is still too high.  Unfortunately the USDA will continue to use their current number until after harvest.  If it were to change it would effect the balance sheet, but that will not be an issue until at least October or November.  A possible answer to why the USDA planted acreage number was so high is that the USDA had been off on their original planting intentions number by close to 2 million acres and that in fact planting intentions should have been 99 million or more.  

The other issue some have with the current USDA balance sheet is that demand estimates may be too high.  Currently the USDA is looking for 700 million bushel increase in feed demand.  It is very difficult to justify this as cattle on feed numbers remain depressed and there is much more pasture this year.  The USDA is also looking for a 1.0 billion bushel increase in exports.  Lower prices would likely bring more export business, but that is a huge jump.  

So, it seems that if there were much of a reduction in yield the USDA has built in some wiggle room for ending stocks.  For example, if there was a 5% reduction in yield ending stocks would be 1.240 billion bushels under the current balance sheet.  However, if you take back 300 million bushels from feed (still a 400 million increase from last year) and 300 million bushels from exports (still a 700 million bushel increase from last year) we are right back to a 1.840 billion bushel carry over.  

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

The point here is that although the USDA may have to lower the yield number in months to come be careful about getting too bullish.  It seems the USDA has built in room for lower yields in their balance sheet by increasing demand numbers more then a realistic amount.  

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.    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.

Should We be More Worried About December 2014 Corn Prices?

Jul 16, 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.        

In recent weeks the USDA has given us bearish numbers in the form of huge planted acreage and some of the biggest ending stocks for corn that we have seen in a long time.  This has put a significant amount of pressure on the December 2013 corn contract.  The outlook for less then ideal weather in some areas during key moisture sensitive growth stages has kept December 2013 corn from a free fall, but what about December 2014?  

At this point it seems that there will be a big corn crop this year.  At this point the question is how big.  We currently believe the USDA is overstating production but also overstating demand.  In the end we feel that we may have already seen the biggest ending stocks numbers that the USDA will put out, but maybe not by a whole lot.  We do feel  that yield numbers and harvested acreage numbers need to come down but much of this will be offset by lower feed, ethanol and export numbers unless lower prices can stimulate some demand.  So all of this paints a bearish picture for the December 2013 corn contract.  But, with crop insurance levels being set at higher prices last February some of this blow will be cushioned.  Furthermore, there has been a lot of investment in storage in the last few years and producers may choose to store and hold grain until prices go back up.  

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

In this scenario producers may be able to keep prices elevated for some time due to a tight cash market.  So between higher crop insurance prices and the potential for producers to hold corn out of the market December 2013 prices may not be headed as low as some people are forecasting.  The bigger problem could be the next growing season.  If prices are much lower in February crop insurance will not offer the same protection as it has in the last few years.  And, if producers are storing grain waiting for higher prices then what happens if we have another big crop next year.  December 2014 corn may be the contract that actually takes the beating.  

We should at least be looking at what we can do with next year.  I am not suggesting flat price hedging.  I would not want to forward contract or lock in prices here with a whole other growing season to go.  I do like the idea of putting some parameters around the market.  We have some option strategies we are using to get this done for corn, wheat and soybeans.  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.   

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

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 did Corn and Soybeans Rally on a Bearish USDA Report?

Jul 11, 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 July USDA supply and demand report was bearish vs expectations for corn and soybeans, so why then did corn and soybeans rally into the close and end up higher on the day?  Well, there are a few other factors at play that had more of an influence then the slightly bearish report.  

Ending stocks for both corn and soybeans came in slightly higher then expected but within the range of trade guesses.  This had a negative effect on corn and soybeans at first, but after a few minutes markets had turned and were headed back up.  Some people will call this report a non-event or a snoozer but the gravity of the large supply numbers may weigh heavily on grain markets long term.  Short term however there are other factors that took center stage today.  

A big reason for the bounce off of lows seems to be fund buying in the grains.  The US$ has been under a lot of pressure in the last 24 hours stemming from comments made by Fed Chairman Ben Bernake.  Yesterday he hinted to a new Fed policy that would increase stimulus and this has put pressure on the US$.  The sharply lower US$ has incubated interest from inflationary fund in buying commodities and after the report had passed it seems they turned their attention to the grains as well.  The long term direction of the US$ now comes into question after being at 3 year highs just days ago.  If this is a change in trend to the downside for the US$ this could add more support to the grains and commodities markets as a whole.

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

Another factor that has a big influence on grains is weather.  Even though we have not seen the same scorching heat and complete lack of rain like we did last year in most areas, this year has not been without its problems as well.  It is easy to dismiss the large carryover numbers in corn and soybeans on the USDA report by saying that a lot can change between now and harvest, and it can.  There is certainly a potential that the weather pattern changes significantly and corn and soybeans miss out on much needed rains during key moisture sensitive stages of growth.  Some of the forecast models have just such a scenario playing out.  However, it is important to keep in mind that at 68% good to excellent in corn and 67% good to excellent in soybeans are significantly higher then where we were last year.  It is also important to keep in mind that even with one of the worst droughts in decades last year we were all surprised by how well crops actually did comparatively speaking.  

The calendar is also another factor.  This is generally the time of year when corn and soybeans are on their way to putting in summer highs.  As we approach the key moisture sensitive stages of pollination the market usually finds some weather to be concerned about and adds weather premium until the key moisture sensitive stages are behind us, or at least the 2 week forecast offers the outlook for good conditions.  Also, there is generally a lack of major sellers as producers would rather wait to see that they have a crop before adding to sales.  

This reversal higher on a bearish USDA report could be a bullish sign for the days to come.  And, there are certainly other factors at work that could continue to add support to grains markets.  Weather really is the key at this point.  A hot and dry spell during pollination in corn or pod set in soybeans could have a negative impact on yields.  However, with the USDA projecting some of the largest ending stocks in corn and soybeans that we have seen in recent years, crop conditions at 68% and 67% respectively and lagging demand it would seem unlikely that ending stock numbers would fall to levels that would necessitate price rationing. 

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

If corn and soybeans make it through key moisture sensitive stages without huge problems covering the entire growing area it is a very good possibility that prices will need to go lower into harvest.  So, embrace the rally, but keep these huge USDA projections in the back of your mind.    

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.

Sell the Bounce in Grains, or Wait for Higher Prices?

Jul 09, 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.        

In the last two days corn, wheat and soybeans have had a nice bounce off their lows.  I was sitting here last Friday as grains were making new recent lows wondering when the market would catch on to this hotter, dryer forecast.  It seems that on Friday most of the guys who pay attention to weather or grain fundamentals were away from the markets and the fund traders were selling any commodities they could because of the higher US$.  Now that the trade has returned we see a hotter, dryer forecast and up we go.  But, is this a bounce to be sold or a new trend higher?  

Weather will have a big say in that.  If it does not rain again for 3 months then we are due for some higher prices.  However, if we do get some timely rains we may be looking at the biggest carry over numbers we have seen for some time, especially in corn.  If this is the case we may need to see lower prices in order to buy back some of the demand that was lost during last summer's trek to record highs.  This could be more difficult then we would imagine.  A lot of it has to do with global economics and currencies.  I know, I know I just lost half my readers because I'm not talking about grains but really I am.   

You see, it was much easier then we expected last summer to ration demand.  We certainly needed to ration demand last year because of the drought but it happened faster and at lower prices then we were all expecting.  A lot of that has to do with the fact that the domestic and global economies are not as healthy as in the past and therefore are more sensitive to price increases.  For example, in 2008 when grains were pushing toward record highs it was tougher to price ration demand because economies were doing well and the end user or consumer was much less price sensitive.  Everyone was willing to pay up for what they wanted.  Now however it is a much different climate, as we are tightening the belts on a global scale.  So, just as it was easier to price ration demand then expected it very well may be more difficult to get that demand back.  It could happen slower and at lower prices then expected especially given the recent strength in the US$.  

As far as the High Pressure Ridge or "dome of death" is concerned.  It is a great reason to bounce off of lows, especially in the middle of July.  It does pose a threat to corn pollination and will cause damage in some areas.  However, from what I see that damage could be minimal.  Most importantly not all of the forecast models agree with this High Pressure Ridge setting up camp over a big part of the growing area.  Most forecasters agree that we will see timely rains and that stress will be minimal to the majority of crops.  But, the timing is right to get a rally from a weather scare and the charts were due so here we are, but I believe it is unlikely to be a change in the overall direction of the markets.  It may just be one last opportunity to sell above $5.20 corn and $12.75 soybeans for some time.  

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

For the remainder of this growing season it seems that we must be concerned that corn, wheat and soybeans have the potential to see lower prices.  The USDA planted acreage number for corn came in much, much bigger then what we had all guessed.  We can argue about it until we are blue in the face, but the fact remains that this is the acreage number that the USDA will use for their balance sheets until after harvest.  That certainly sets us up for some very big ending stocks numbers going forward.   

Yield now becomes the biggest question to determining production, and this may be where the USDA makes up for the much larger then expected planted acreage number.  Remember, the USDA has already lowered their original yield estimate by 1.5 bushels an acre for corn.  This could be a trend and could shrink ending stocks a bit.  And, the smaller then expected quarterly grain stocks number could mean there is more demand out there and could justify higher demand numbers from the USDA which could also shrink ending stocks a bit.    

However, with corn and soybean conditions in the upper 60% range in the good to excellent category and demand indicators continuing to disappoint is seems impossible for the USDA to give us ending stocks numbers that could be anything but bearish going forward.  Yes, maybe the July report will not be as bearish as our worst fears and we might get a bullish reaction to it but in the end the number will be bearish longer term.  

Producers should be thinking about pricing on bounces from here on out.  Some of the strategies we use allow for some upside potential to capitalize on a rally while still offering a price floor.  Please feel free to give me a call or shoot me an email if you would like to talk about your marketing plan.  The last few years no marketing plan has been a good marketing plan, but this does not seem to be one of those years and the guys who are able to see that may be greatly rewarded.  

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

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 

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

Where Were You Last 4th of July?

Jul 02, 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.        

As we sit here making plans for the 4th of July holiday I can not help but think about last year.  A year ago I was getting ready to take the family to the Wisconsin Dells and looking at the stretch of 100+ degree days to come wondering if we would have a chance to be outside at all.  On the drive up I saw a lot of corn and soybeans that seemed to be in dire straights, the way back looked even worse.  We were in the middle of a scorching drought and it showed.  When markets opened again on the 5th corn, wheat and soybeans gaped higher on route to record highs.  You know, its funny how much I remember about last summer, where I was and what I was thinking.  It was a year that I will always remember and think about for the duration of my career, it was that kind of year.  

In so many ways this year is not like last year.  In recent articles I have touched on many of the obvious and some of the more subtle differences.  But as december corn crosses into sub $5.00 territory for the first time since early last spring I am sharply reminded of how quickly things can change.  What we have now is actually similar in some ways to the beginning of last growing season.  We had planted a huge amount of acreage and we were expecting massive ending stocks before the drought took hold.  

This year has certainly had its issues as well.  A wet spring kept planting at a record slow pace.  Late planted corn and soybeans have raised concern about lower yield potentials.  But as we head into the 4th of July Holiday this year we should all take a moment and think about where we are now, where we were last year and where we could be a year form now.  

For the remainder of this growing season it seems that corn, wheat and soybeans have the potential to see lower prices.  The USDA planted acreage number for corn came in much, much bigger then what we had all guessed.  We can argue about it until we are blue in the face, but the fact remains that this is the acreage number that the USDA will use for their balance sheets until after harvest.  That certainly sets us up for some very big ending stocks numbers going forward.   

Yield now becomes the biggest question to determining production, and this may be where the USDA makes up for the much larger then expected planted acreage number.  Remember, the USDA has already lowered their original yield estimate by 1.5 bushels an acre for corn.  This could be a trend and could shrink ending stocks a bit.  And, the smaller then expected quarterly grain stocks number could mean there is more demand out there and could justify higher demand numbers from the USDA which could also shrink ending stocks a bit.    

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

However, with corn and soybean conditions in the upper 60% range in the good to excellent category and demand indicators continuing to disappoint is seems impossible for the USDA to give us ending stocks numbers that could be anything but bearish going forward.  Yes, maybe the July report will not be as bearish as our worst fears and we might get a bullish reaction to it but in the end the number will be bearish longer term.  

Producers should be thinking about pricing on bounces from here on out.  Some of the strategies we use allow for some upside potential to capitalize on a rally while still offering a price floor.  Please feel free to give me a call or shoot me an email if you would like to talk about your marketing plan.  The last few years no marketing plan has been a good marketing plan, but this does not seem to be one of those years and the guys who are able to see that may be greatly rewarded.  

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

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.

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