Aug 20, 2014
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May 2014 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.

Will Corn get back to $5?

May 29, 2014

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY 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 has been under pressure in the last few weeks as the USDA suggested a larger than expected carry over number for new crop corn and planting progress has caught up to the 5-year average.  Both July and December corn are now more than 50 cents from highs.  Warmer temperatures and a quick catch up in planting progress has taken a lot of uncertainty premium out of the market, but was this the end of the story for corn?  

In the last few weeks the trade has lost much of its fear that delayed planting and cold, wet weather would keep the corn crop from getting planted.  In the mean time the USDA came out with a 1.73 billion bushel new crop ending stocks figure which was higher then trade expectations.  This has eased most concerns and caused the market to fall quickly.  However, if we look at the USDA's new crop balance sheet we still find some cause for concern and when we look at planting progress we have some concern as well.  

The USDA's current balance sheet is assuming that the 91.7 million acres from the prospective plantings report will get planted.  With a cool and wet beginning to the growing season there was concern that some acres would get lost or switched to soybeans.  However, now that planting progress has matched the 5-year pace the concern has fallen away.  But, if you look at the state-by-state breakdown we still see some concerning issues.  North Dakota had been the biggest concern with only 17% of their corn crop planted 2 weeks ago.  Weather got better and they made huge progress and are now 67% planted as of the last planting progress report.   

This is a huge jump in a short amount of time but there is still 1/3 of the corn crop to get planted and at this point it is questionable whether there is still time to plant corn or not, the window of opportunity to plant is shorter the further north you go.  If 67% planted in corn was the best we could do in North Dakota this would be about a 1 million acre loss in corn acreage.  It seems unlikely that North Dakota stopped planting corn after last week, but what if they can only get to 80% before it is too late?  This would still represent a 600,000 acre reduction in corn acreage and there are similar concerns about Michigan, Ohio, Wisconsin and Minnesota.  Some acreage will be lost in northern areas.  It also seems likely that some of the other states that are well ahead of pace will add corn acres but the result will likely be a net reduction.  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: http://www.zaner.com/offers/?page=17  

A lower planted acreage number for corn could take away some bushels from the USDA's big ending stocks estimate for new crop corn.  The bigger issue may be that the USDA is using a trendline yield number that many people think will be difficult to realize.  Currently the USDA is using a national average yield number that would be a record yield.  It seems to be a bit of a stretch to expect a record yield at this point in time.  It is interesting to note however that the previous yield record was set in 2009 which is a year that many weather forecasters are comparing to their expectations for this year.  Even so, there is a lot of growing season to go and it would need to be almost perfect to get the yield the USDA is currently estimating.  

With the potential for less corn acres planted, tighter than expected beginning stocks and the USDA expecting a yield number that may not be realistic the corn market should be very weather sensitive this year.  Unlike soybeans there is really very little room for error for the corn crop this year.  In order to have comfortable corn stocks next year we will need to have near perfect weather on the smaller acreage planted.  

This means that if at some point we see a two week forecast that looks threatening (which happens most years at least once) corn could rally sharply to conserve old crop beginning stocks and slow export sales.  The question will be where could we be rallying from if we were to get a weather scare.  If it is much lower then where corn is now it may be difficult to get back to $5, but considering the potential issues we could have this year it would make sense for corn to find some near-term support near current levels.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Corn: http://www.zaner.com/offers/index.asp?page=20 

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.     

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

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

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

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.

Are the Highs in for New Crop Soybeans?

May 27, 2014

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY 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.       

Many times new crop soybeans will put in their spring high once the crop is 50% planted.  This can be especially true in years where there are concerns about planting delays such as this year.  The idea is that the market is concerned we may not get all of the intended acreage in and the market is trying to make sure acreage doesn't get lost to corn in the mean time.  So, many years soybeans will put in their spring highs before the crop is about 50% planted and then start coming down after that.  This year we may not only be looking at spring highs but possibly yearly highs as well.  

With soybeans now 59% planted as of May, 25th we are now on pace to get all of the intended soybean acreage planted and the weather forecast looks good.  So, it now looks likely that the record soybean acreage that the USDA is looking for will get planted and we could even be gaining some more soybean acres as some of the northern areas are getting past the window to plant corn.  With the planting uncertainty falling away from the market this could pull some of the strength out of the market.  

We have awesome CRB wall charts to give out!  They are weekly bar charts that go back 10 years to Oct, 2003 and are about the size of a poster.  If you'd like one sign up here - Soybeans: http://www.zaner.com/offers/index.asp?page=21

However, much of the strength in new crop soybeans has been tied to the tight balance sheet and higher prices of old crop soybeans.  Old crop soybeans were also down sharply to start the week, but the argument over old crop supply still rages on.  Some analysts feel that the USDA is still too low on exports and too high on imports saying that the carry over number should be lower than the USDA's estimate of 130 million bushels.  Other analysts will argue that basis is lower in many areas than this time last year suggesting that there are more soybeans out there then the USDA is estimating possibly coming from higher production last year or stronger then expected imports.  This argument will likely not be settled until the June 30th Quarterly Grain Stocks report.  In the mean time this could continue to support new crop soybeans and keep things pretty volatile.  

Looking past the old crop soybeans situation the new crop story is potentially the most bearish fundamental set up of all of the grains.  With the US planting a record amount of acres and large global stockpiles of oil seeds we could be set up to see the largest US ending stocks number in recent history.  If soybeans get halfway decent weather this growing season new crop soybean prices could be substantially lower come harvest.   

Sign up for our Morning Ag Hedge newsletter!  Sign up here: 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.     

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

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

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

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.

What will Funds do with Their Massive Soybean Position?

May 22, 2014

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY 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.       

Large speculators, or funds have been buying into the old crop soybean story for some time now amassing a huge long position along the way.  This has worked well for them as July soybeans have rallied almost $3.00 since February.  With first notice day for July soybeans only 3 weeks away what are the funds going to do with this massive long position?  

Old crop soybeans have had a strong rally in the last few months based on the idea that ending stocks this year are very tight and even lower than last year.  The funds have also had a hand in this as they have built a massive long position of an estimated 130,000 contracts.  For perspective, open interest (or the number of open trades) in July soybeans is 275,557 contracts.  The fund position is spread out over a few months, but it would seem that the majority of these long positions would be in July.  

With first notice day for the July contract three weeks away the funds will be looking to do something with these long July positions.  First notice day is the first day long positions can be assigned physical delivery of a commodity, in this case soybeans.  I very highly doubt that these large speculators intend to take physical delivery of soybeans.  So, they will need to look get out of these long July positions just like they did with the May positions before the May contract went into first notice day.  But, this may present a problem for funds.  

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

July soybeans is really the last old crop soybean contract with any sort of volume.  Again, open interest in the July contract is a little over 275,000 contracts while open interest in August soybeans is only about 32,000 contracts and open interest in September is less then 20,000 contracts.  So, unless the funds want to be 70% or more of the open interest in any given contract it seems unlikely that this would be an option for them, at least not on a large scale.  

Funds could roll to the November contract which has a healthy open interest of over 222,000 contracts.  However, November is new crop soybeans and comparing new crop soybean fundamentals to old crop soybean fundamentals is like comparing apples to oranges or John Deere to Case IH - they are night and day.  Old crop soybeans have a tight balance sheet and the market is concerned we may run out of soybeans this year.  New crop soybeans could get a record number of acres planted in the US and a near record amount of oil seed stocks in the world.  With good weather we could be swimming in soybeans next year.   

To some extent we believe the funds have and will move a portion of the long position to November soybeans, mostly for technical reasons.  However, the old crop story was what they bought into and the new crop story is not as enticing.  Producer selling could pick up as planting rolls along as well and this could put more pressure on the fund positions than they have seen in a while.  But, they may know this.  

Some of the rally we have seen lately may be funds trying to push the market higher in order to work out of some of their long positions.  The idea is that since volume is fairly low as producers are out in the fields planting crops the funds can buy some soybeans to get all of the smaller speculators excited and push the market higher so that the funds can start to sell off some positions into the strength.  This is a theory, but it would be a sneaky way of working out of a massive long position without pushing the market sharply lower, at least at first.  It will be interesting to see how soybeans act next week if planting progress shows 55-60% completed and producers get back to watching markets.  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: 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.     

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

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

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

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 Realistic is the USDA's 2014/2015 Corn Projection?

May 15, 2014

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND MAY 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 May 9th USDA WASDE report the USDA gave us their first projection of the new crop corn balance sheet.  Production and ending stocks were surprisingly large compared to trade estimates.  With the USDA currently projecting a 1.726 billion bushel carry over how realistic is it that we reach this number?  Lets break down 3 keys to the balance sheet.  

Acreage  

For the May 9th report the USDA used the Prospective Plantings report acreage number projections.  This puts corn planted acreage at 91.7 million acres.  With a cold and wet spring causing planting delays in the northern areas it remains questionable whether we will get the intended corn acreage planted or not.  It seems likely that some acreage could be lost in Minnesota, Wisconsin, Michigan and especially North Dakota.  Planting progress is well behind in these areas and although their weather forecast is dryer than it has been all spring the window of opportunity to plant is coming to a close.  Our current estimate is that there will be 600 to 900 thousand acres of corn that will get switched or prevent planted.  However, many analysts were looking for a higher planted acreage number then the USDA's 91.7 million acres.  Our estimate before we began planting was 92.4 million acres.  If we were to cut this by the 900,000 acres we think could go unplanted it would get us just under the USDA at 91.5 million acres.  So, we do believe the USDA planted acreage number could be fairly accurate as long as the northern areas do get a chance to make some planting progress that the current forecast suggests.  

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

Yield  

Other than planted acreage the other key to production is yield.  The USDA is currently using the trend line yield estimate from their Baseline report in Feb.  This trend line national average yield number is 165.3, which would be a new record.  The previous record was set in 2009 at 164.7.  While there are a lot a similarities between this year and 2009 in regards to planting progress and the expected El Nino pattern during the growing season we think it may be too early to expect a record national average yield especially with some corn getting planted late in northern states.  However, if there is acreage lost in some of the historically lesser yielding areas this could give the national average yield number a boost given good weather.  The bottom line here is that we will need to see near ideal weather from here on out to hit the current USDA yield projection.    

Total Use (Demand)  

Of the many surprises the USDA gave us on their first new crop corn balance sheet the demand side was the strangest for me.  They are currently estimating total usage at 13.385 billion bushels which is a reduction of 250 million bushels from the current marketing year.  It is not often that the USDA lowers demand in a year where we expect lower prices and building stocks.  Typically they offset bigger production with stronger demand.  However, it seems that they believe that there was some pent up demand this year after the record high prices of the last marketing season and that demand will cool down next year.  This could be the case but it is a bit unusual and early to assume this.  

So What are the Chances?  

The interesting thing here is that the USDA may have given themselves a back door.  With the USDA lowering the old crop corn carry over by 150 million bushels it also lowers the beginning stocks for next year.  So, if the old crop corn ending stocks were to start to go up again, as we think they will, it could fully or at least partially offset small reductions in acreage or yield.  When it comes down to it the USDA may not have had to increase exports 150 million bushels and we feel feed and FSI numbers may be a bit high.  So this may give them a little wiggle room to work with on the production side.  However, with lower acreage numbers and the expectation of a record national average yield there will be a lot of pressure to produce a near perfect crop this year to hit the current USDA projections.  This will mean we would need near perfect weather to do this and so far that has not really been the case.  So, get ready for the weather market it may be a wild one this year.  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: 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.     

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

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

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

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 the Corn Market Stop Worrying about Planting Delays?

May 13, 2014

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 planting progressed quickly last week with a 30% jump in acreage planted.  This was at the high end of market expectations and is not only 33% ahead of last year, but also 1% ahead of the 5-year average.  Should the market stop worrying about planting delays at this point?  

At first glance the lasts crop progress report would suggest that planting delay concerns and fears that we will not get corn planted should be behind us.  After all we are quite a bit further along this year then we were last year and we planted more corn acres last year.  But, as we dig into the state by state breakdown the picture changes a bit.  Some states made quick progress last week and are now ahead of the 5-year average while other states continue to have big issues.  

The I States (Illinois, Iowa, Indiana) are now on par with or ahead of the 5-year average.  Illinois is 78% planted compared to 53% on average and 16% last year.  Iowa is 70% planted compared to 70% on average and 14 % last year.  Indiana is 61% planted compared to 45% on average and 27% last year.  

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

However, the northern states continue to lag behind. Minnesota, the 4th largest acreage by state is 31% planted compared to 62% on average.  Wisconsin and Michigan are both 20% planted compared to 41% on average.  North Dakota is by far faring the worst at only 3% planted compared to 33% on average and 16% last year.  This is where we could run into a big problem.  We are expected to plant 18.25 million acres in these 4 states, 3 million acres in North Dakota alone.  And, these are areas with a shorter growing season meaning that the window of opportunity to plant is smaller.  So, major progress needs to be made in the next 2 weeks or some of those acres may get switched to another crop or prevent planted.  

At the moment the forecast looks dry enough for some field work to get done in the next 7-10 days but cool temperatures could make drying out a slow process.  So we will expect to see a jump in planting progress next week but how much will be key.  It seems likely that some acres will be lost, especially in North Dakota, but the big question will be how much.  

Some of the potentially lost acreage in the far northern reaches of the corn belt may be offset by more acreage in the states that are ahead of the 5-year average.  Planting progress has been good any corn planted could keep rolling.  There is also the idea that there is still 1.5 to 2 million acres that the USDA did not account for on the Planting Intentions report and that a good chunk of that could go to corn.  But, will this be enough to offset acres lost in the north?   

In a year where we are expecting to plant less corn every acre makes a difference.  Less acreage in lower yielding areas could help the national average yield but it doesn't totally compensate for lost acres.  Also, with beginning stock for next year shrinking to 1.15 million bushels (from what was once thought to be 2 billion bushels) there will be a lot of pressure to have a near perfect corn crop this year to hit the current USDA projections.  

With corn planting now 1% ahead of the 5-year average after being 13% behind last week the market seems to feel like there is less to be concerned about.  However the northern states continue to struggle to get corn planted and this could still have a large impact on corn production and ending stocks this year.  The jump in corn planting is certainly a step in the right direction, but we are not out of the woods yet.  

Sign up for our Morning Ag Hedge newsletter!  Sign up here: 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.     

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

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

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

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.

Are We Going to get Corn Planted This Year?

May 08, 2014

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 of May 4th the USDA NASS is reporting 29% of the corn crop planted.  This is 13% behind the five-year average of 42% and has been the driver of stronger corn prices.  The concern is that planting delays could translate into lower planted acreage for corn and loss of yield potential.  So, the question is - will we get corn planted in time?  

At face value the planting progress number is not overly concerning.  Yes, we are 13% behind the five-year average but we are 18% ahead of last year and we managed to plant 95.2 million acres of corn last year compared to the 91.7 million acres that the USDA estimated on the Prospective Plantings report.  So, we have more corn planted this year and less to plant.  The problem this year however, is where we are behind.  

Many key states are at or near the average planting pace.  Illinois for example it at 43% compared to 41% on average.  Indiana is 20% planted compared to 34% on average and Nebraska is 44% planted compared to 45% on average.  And, many states that were behind have had good opportunities to plant this week.  So, it is possible that we are setting up for a big jump in planting progress on the next crop progress report.  At first glance it seems like corn will get planted in a timely fashion this year.  However, there is cause for concern.  

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The 5 states that are the farthest behind are mostly in the far Northern areas of the corn belt.  Minnesota is expected to plant 8.6 million acres of corn this year, the 4th most acres per state, and they are currently only 8% planted compared to 46% on average.  Wisconsin, the 8th most acres per state, is only 2% planted compared to 23% on average.  Ohio is only 9% planted compared to 32% on average.  Michigan is 3% planted compared to 23% on average.  North Dakota, which we are already expecting a 1 million acre shift from corn to soybeans, is 0% planted compared to 19% on average.  These 5 states account for almost 22 million acres or 24% of overall planted acreage.  

To make matters worse the weather forecast is not very friendly in the next 10 days.  It looks likely that many of the far northern areas, especially in North Dakota will not get a chance to plant corn until after May 15th.  This is concerning because the northern areas of the corn belt have shorter growing seasons and windows of opportunity to plant.  This could have a negative impact on yield for acres that do get planted and/or could cause producers to switch more corn acres to other crops.  

This would suggest that some of the intended corn acres could be lost if weather does not get better in the short term.  However, it will not likely be a huge loss.  We would think that Minnesota and Ohio will get most if not all of their intended acreage in with only small losses in acres in northern parts of Michigan and Wisconsin.  North Dakota however could be a different story.  We currently think that as much as 800,000 acres in North Dakota could get switched to other crops or Prevent Planted if the weather forecast does not get better.  Overall we would think that corn may loose 1.2-1.4 million acres as a whole.  Again, there is still a chance weather gets better and all of the corn acres get in, but the forecast is not currently very optimistic.  

This may not be a dire situation however.  First, many of the acres that corn may loose are not the highest yield producing areas.  Although this does not make up for lost acreage it could mean we have a better shot and a high national average yield.  Secondly, many analysts believe there are more acres out there to get planted and that corn acreage may be increasing in some states. This may not make up for acres lost in the north, but could soften the blow.  And finally, later planted years do not always have a negative effect on yields or acreage.  In 2009 we were only 33% planted as of May 4th.  That year we ended up planting more corn acres than were expected in the Prospective Plantings report and we ended up with a record national average yield that still stands.  We had a moderate El Nino season starting in late June in 2009.  

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

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.     

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

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

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

Futures, options and forex trading is speculative in nature and involves substantial risk of loss.  This commentary should be conveyed as a solicitation for entry into derivitives transactions.  All known news and events have already been factored into the price of the underlying commodities discussed.  The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.

What is the New Crop Soybean Situation?

May 06, 2014

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 Friday the USDA will release their estimates for new crop soybeans for the first time on a Monthly WASDE report.  This has the trade thinking about what the prospects are for new crop soybeans.  With the potential for record world stocks going in to what looks like record US planted acreage what should we expect for new crop soybeans?  

 As always weather will be the biggest determining factor for the soybean crop.  And, although long term weather forecasts can be very wrong, forecasters are looking for a moderate El Nino summer weather pattern which could be very beneficial to the soybean crop.  If this weather pattern were to verify it could mean good yields for soybeans.  On the other hand, hot and dry conditions in the plains have some weather forecasters drawing comparisons to conditions in 1936 when the US had a major drought year.  If the hot and dry conditions in the plains were to spread to the key soybean growing areas there could be a major production issue.  This situation will need to be watched closely, but for now the vast majority of weather analysis are looking for a good growing season for soybeans.  We are currently estimating the national average soybean yield at 44.9 bushels an acre.  This would be .3 bushels an acre lower then the USDA's trendline yield.  We are looking for a lower then trendline yield even with good weather because some of the acres soybeans will be picking up may be "fringe" acres which could have a slightly negative impact on the national average yield.  

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

Acreage will be the other big determining factor in soybean production this year.  According to the USDA Prospective Plantings report we are looking for 81.5 million acres of soybeans to get planted.  This would be a record number of acres planted to soybeans in the US.  And, with planting delays in corn soybeans may be actually gaining some acreage.  We feel soybeans could still gain upwards of 1 million acres yet, but for now we are estimating soybean planted acreage at 81.8 million acres, 300,000 acres higher then the USDA prospective Plantings estimate.  We are also estimating harvested acreage at a conservative 80.5 million acres.  

The demand side of the equation is an interesting question.  Currently the USDA is estimating a 260 million bushel increase from 2012/2013 to 2013/2014.  This is almost all coming from a record pace of exports.  Looking back at the last few months it looks likely that China double booked their Feb-May needs from both the US and South America.  The idea was that if South America were to have major harvest delays like in years past they would take delivery on the US purchases, but if South America were to get moving quickly (as they did) then the plan was to take the South American shipments and cancel the US shipments.  So, when South America was able to move forward with harvest in a timely manner and get soybean shipments rolling China went to cancel US bookings but they were told they couldn't.  This eventually caused a big problem in China and sent them scrambling to try to cancel the lower priced South American soybeans, some of which ended up getting repurchased by the US.  This was not the situation the Chinese had in mind.  So, we think it is likely that the Chinese will not make that mistake again.  This could mean that China may not be as aggressive of a buyer next year if the South American crop looks good.  Currently we think exports could come down 40 million bushels next year but domestic crush could increase 30 million bushels putting our total usage estimate at 3.350 billion bushels.  

Zaner Ag Hedge's new crop soybean estimate -

With a harvested acreage estimate of 80.5 million acres and a yield of 44.9 our production estimate is 3.615 billion bushels.  Adding 130 million bushels for carry in we get a total supply of 3.745 million bushels.  Our total use estimate is 3.350 billion bushels.  This leave us with our current new crop soybean ending stocks estimate of 395 million bushels.  Again, weather will play a big role in determining soybean production and our estimate assumes normal weather as well as normal South American production.  

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This would represent on of the largest soybean ending stocks numbers in recent history.  It seems that after years of high prices in soybeans the world may have overcompensated for production.  If weather is normal for the next US and South American growing seasons soybean prices could move lower to reflect the large world supply of oilseeds.  

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.     

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

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

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

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.

May Starts with a Bang for Soybeans

May 01, 2014

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 Month of May sure started out with a bang as July soybeans were down over 50 cents only one day into the month.  This is the largest one-day move in soybeans so far this year and it was to the downside.  What does this mean for soybeans going forward?  

July soybeans posted an new high close for the year on Tuesday at $15.20 1/2.  For the last few months soybeans have been on a mission to price ration demand for fears of running out of soybeans this year.  A record pace of export sales, a stronger then expected domestic crush and a lack of Chinese cancellations have fueled the $2.80 cent rally off of lows.  Currently the USDA is projecting a very tight 135 million bushel soybean carryover but some feel that final soybean carry over could be closer to 110 million bushels due to stronger then expected crush and export shipments numbers.  Currently the USDA has exports pegged at 1.580 billion bushels and total commitments are at 1.638 billion.  If we were to ship the total commitments we have on the books we would be 58 million bushels above the USDA estimate and this could severely cut into the 135 million bushel carry over number.  

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However, soybeans were very heavy to start the month of May.  This came from a negative export sales number and talk that more South American soybeans were on the way to the US.  Export sales were negative for the first time this year.  The trade had been watching closely for Chinese cancellations and a negative export sales number for some time but it hasn't come - until this week.  The negative .6 million bushel soybean sales number is a long way from the reduction in sales we need to see to get back to the current USDA estimate.  However, export sales have slowed to next to nothing in the last few weeks and this negative sales number this week could be an indication that more reductions are on the way.  

There has also been lots of talk in the last two days of South American soybeans headed to the US.  Two weeks ago newswires confirmed that there were 2 panamaxes of South American soybeans that had been canceled by China and were on their way to the US.  In the last two days the talk has been that there is now an additional 10 on the way.  In the mean time cash bids at the Gulf and in South America dropped sharply.  This is fueling talk that US imports of South American soybeans may be higher, even much higher then the current USDA estimate.  The USDA is already expecting a record amount of US imports this year but some people think actual imports may be twice as much as current USDA estimates.  This would take a significant amount of pressure off the tight US balance sheet and may end the need for price rationing soybeans.  

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

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.     

May Corn Daily chart:

May Soybeans Daily chart:

May Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

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

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

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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