Aug 31, 2014
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June 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.

Old Crop Soybean Sales and the QGS Report

Jun 26, 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.       

For the week ended June 19th the USDA reported  317,000 metric tons, or 11.7 million bushels of old crop soybeans sold for export.  This number surprised the market as expectations were around 50,000 metric tons.  The unexpectedly high weekly export sales number was bullish as the USDA is already estimating a tight balance sheet and is still estimating soybean exports well behind total commitments.  This re-ignites the question - is the US going to run out of soybeans this year?  

The USDA is currently estimating soybeans exports for the 2013/2014 marketing year at 1.6 billion bushels.  After the 11.7 million bushels sold last week total commitments are now 1.671 billion bushels, 71 million bushels above the current USDA estimate.  If all of the total commitments were shipped this marketing year it could cut the already tight USDA ending stocks estimate in less then half.  The current USDA ending stocks estimate is 125 million bushels and if export shipments are in fact 1.671 billion bushels as opposed to the current USDA estimate of 1.6 billion this would leave us with ending stocks of only 54 million bushels.  This would be the tightest soybean ending stocks on record.  If this were the case it could suggest that soybean prices should go sharply higher to cut out any further demand.  

However, there are some disconnects between the USDA's estimates and what is happening in the cash market.  Cash soybeans just are not as strong as they were this time last year and last year ending stocks were estimated at 141 million bushels compared to the current USDA estimate for this year of 125 million bushels and the potential 54 million bushels carry over we could see if all of the export sales commitments on the board ship out.  The other question is - why would we still be selling soybeans if there was really nothing left to sell?  It seems like there could either be more soybeans out there then the USDA knows about or end users are waiting till the last minute to book their needs.  If the later is the case there could still be a sharp rally in soybeans before the new crop is harvested.  

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

The USDA will shed some light on this burning question with the Quarterly Grain Stocks report on Monday, June 30th.  If the soybean situation is as tight as the USDA's numbers are suggesting then the Quarterly Grain Stocks numbers should be well below this time last year.  If, however stocks are near or higher then this time last year it suggests that there were more soybeans out there then the USDA saw.  If this were true it could be the product of the USDA not getting last years production right.  In a way the USDA has a "get out of jail free" card on this because they were closed by the government shut down last year when they needed to be out in the fields collecting yield data.  By the time they were able to get out into fields and collect data it was the tail end of the harvest and they may have only seen the lower producing acres as we generally harvest the best fields first.  

Either way this Quarterly Grain Stocks report is shaping up to be one of the biggest reports of the year, especially for old crop soybeans.  If stocks are tight it could mean that soybean prices still need to go sharply higher to shut down demand.  How high is a great question.  Earlier this year soybeans rallied above $15.30 to try to slow down the record pace of export sales with little effect until South American soybeans became available.  So prices could go even higher yet if the very tight soybean situation verifies.  However, if there are more soybeans out there as the cash market and continued export sales suggest then soybean prices could fall under pressure.  With record planted acreage this year and good weather to start the growing season it may not be so important to have much of a carry in for next year.  This means that as long as the old crop situation isn't dire enough to cause soybeans to sharply rally in order to completely cut out any further demand prices could come down even with the balance sheet being fairly tight.  

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

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 Good is this Soybean Crop So Far?

Jun 24, 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.       

According to the USDA soybean crop conditions are very good with 72% of the crop in good to excellent condition.  With the USDA looking for a record yield soybean conditions will need to stay good throughout the growing season.  It's still early in the growing season but how does this soybean crop stack up so far?  

With 72% of the soybean crop in good to excellent condition we are certainly off to a great start.  In fact, this is the best conditions rating for soybeans at this time of year since the NASS started publishing crop conditions in 1986.  The only other years that were 70% G-E or better at this time were 1994 and 2003.  In 1994 we ended up setting a record national average yield of 41.4.  At the time this was a record by a huge margin (the previous record set in 1992 was 37.6).  This was almost a 4 bushel per acre improvement on the previous national average yield.  Currently the USDA is looking for a record yield for their balance sheet.  They are expecting a 45.2 which would be 1.2 bushels and acre above the previous record of 44 bushels an acre set in 2009.  

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

The other year soybeans conditions were 70% G-E or better was 2003.  The national average yield in 2003 ended up at 33.9 bushels per acre.  This was 7.5 bushels below the previous record national average yield (again 1994)!  If that were to happen this year the USDA's balance sheet would be dramatically tighter even with the record planted acreage.  

So, the soybean crop so far looks great.  Soybeans are 72% good to excellent compared to a 5-year average of 63% and an all time average of 61% for this time of year.  This is the best rated crop for this time of year that we have seen.  However, as we saw in 2003 a lot can change between now and harvest. This may help explain why November soybeans have held their range so well despite the fantastic crop conditions.  

The bottom line is that soybeans are on a good track to set record yields this year and maybe by a long shot.  However at this point in the growing season we can not take anything for granted.  Soybeans will need good rains in August to produce huge yields.  So, while soybeans might not need to rally with good conditions it may take at least a few more weeks like this before the trade believes the crop will be a record breaker.  

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.

Is Corn Threatening to Rally?

Jun 19, 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.       

Just as many analysts jump on the $3.50 bandwagon corn has its biggest 2-day rally since the first week of May.  In the last few trading seasons corn has managed to hold key support and now close over resistance.  Is this the beginning of a bigger bounce in corn?  

In many years corn has put in a high in June or July.  This June, so far, has been dominated by pressure in the corn market with corn contracts making new recent lows earlier this week.  Weather has been near ideal for the start of the growing season and crop conditions are near record highs.  This has fueled thoughts that corn yields this year may not only be a record but maybe a record by a long shot.  However, it is very early in the growing season to be making such assumptions.  The problem is weather and crop conditions are about as good as it gets, so either weather and conditions remain the same or they get worse.   

As I wrote in an article last Thursday, there have been 5 years in the last 20 years where crop conditions have been at least 72% good to excellent at this time of year.  Only one of those years ended up setting a new record yield.  My point then, as it is now, is that although we are on track to hit record yields a very good looking crop at this point doesn't always translate into a record breaker.  It is very possible, and maybe likely that something in a weather forecast going forward calls the idea of record yields into question.  

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   (US only please)

This year it is record yield or bust (for the USDA balance sheet at least).  The USDA is looking for a record yield and anything short of a record changes the balance sheet dramatically.  With fewer planted acres in corn this year (down almost 6 Million acres from the 2012 high, and maybe more) it becomes vital for the acres that are planted to do well and for the national average yield to be high.  If yields were to slip even just a few acres a bushel the USDA balance sheet starts to get tight under their current demand/usage estimates.  If we ended up with the same yield as last year ending stocks would slip to about 1.1 billion bushels.  Shave another bushel or two off and were are well below a billion bushels.  This sort of scenario could cause a need for price rationing (higher prices) to curb demand.  

So, corn conditions and weather so far have been very good, but the crop is not made yet.  The corn market has good reason to be very sensitive to any hint of adverse weather this year.  With weather being nearly ideal so far it wouldn't take much to spook the market.   At this point we may have taken too much weather premium out of the corn market and corn could be poised for a bounce, even without a major weather issue.  If there were a major weather issue however, for example it got hot and dry in July, corn could really find some strength.  

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.

July Soybeans Close Below $14 for the First Time in Over 2 Months

Jun 17, 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.       

Old crop soybeans were down sharply again today as the July contract closed down 23 1/2 at $1398 1/4.  This marks the first time and old crop soybean contract has closed below $14.00 since late March.  The USDA has not increased old crop ending stocks, but the trade may be starting to believe that things may not be as tight as once thought.  

In less then a month the July soybean contract has fallen almost $1.50, or a little over 10%.  For most of this calendar year soybean prices had been very strong as a record pace of export sales and a strong domestic crush has led analysts to believe that we may just about run out of soybeans this year.  However, as we get closer to the end of the current marketing year it seems that the trade is questioning how tight the stocks situation really is.  Cash soybean prices have not really reflected the USDA's super tight ending stocks estimate.  In many areas basis levels are weaker then where they were last year at this time even though the USDA is currently projecting a tighter balance sheet.   

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  

It is possible that the USDA underestimated the soybean crop last year.  Last year, when the USDA inspectors were supposed to be out in fields gathering yield data, the government shutdown closed the doors of the USDA.  By the time they were able to get back into fields they were looking at the tail end of the harvest.  So, they very likely were looking at some of the poorer fields as the good, high yielding fields get harvested first.  This could mean that the USDA's production number from last year may be low and this could account for more soybeans being available.  It is also possible, although maybe unlikely that there have been more imports then the USDA is projecting, but we really have no way of knowing since there is no import reporting system in place.  

The USDA will weigh in on the matter on June 30th when we get the Quarterly Grain Stocks report.  If this report were to show larger soybean stocks it could certainly put an end to the old crop tightness concerns, but it may have a big impact on new crop soybeans as well.  If the USDA's current old crop ending stocks number were to get bigger then the current 125 million bushels these additional bushels would be added to the beginning stocks for the new crop balance sheet and could increase the already large projected new crop ending stocks.  This could put further pressure on the soybean complex as a whole.  

The June 30th reports are shaping up to be one of the biggest USDA events of the year.  Grain Stocks and Planted Acreage will have a large impact on the soybean complex, old and new crop.  In the mean time the July soybean contract has been under significant pressure.  With the funds still carrying a significant long position in soybeans it will be interesting to see how they handle the transition out of the July contract leading up to the report.  

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.

Is Corn Close to a Near-Term Bottom?

Jun 12, 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 month as crop conditions are very good.  December corn has now fallen over 75 cents off April-May highs.  Weather has turned good after a cool wet start to the growing season and crop conditions are tied for the third best in 20 years for this time of year.  But, with months left in the growing season and some longer-term weather forecasts turning drier could corn put in a near-term bottom soon?  

Corn conditions are very good at 75% good to excellent.  To put this in perspective this puts the corn crop tied for the third highest crop conditions in the last 20 years behind only 2007 and 2010 (both at 77% G-E).  So, obviously this corn crop looks very good right now.  However, good crop conditions this time of year does not guarantee a record yield.  In fact, there are 5 of the last 20 years with corn conditions rated 72% G-E at this point of the growing season and of the 5 only one ended up producing what was a record yield at the time - 1994.  Actually, the two highest rated and also most recent years that corn was above 72% G-E at this point were 2007 and 2010.  Both years were at 77% G-E at this point and both years ended with good but not record yields.  2007 produced a national average yield of 150.7 and 2010 produced a national average yield of 152.8 (keep in mind yields have trended higher over time) compared to 160.4 in 2004 which was the record until 2009.  

In most years it is not super important to have record yields to have a good corn crop, but this year may be a little different.  First of all the USDA Planting Intentions report showed that we intended to plant fewer corn acres this year (down almost 6 million acres from the 2012 high) and a cool and wet start to planting may have caused some of the intended corn acres in the northern growing areas to get switched to other crops or not planted.  So, with fewer acres it becomes more important to have the acres that do get planted produce very good yields.   Now, much of the reduction in corn acreage comes from areas that historically have lower average yields.  This may help boost the national average yield but near prefect weather will be needed to hit the mark.  The USDA will give us their Planted Acreage number on June 30th which will give the market a better clue on just how good this corn crop needs to be.  

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

The second reason it is important to have a record yield this year is that the USDA is currently using a record yield for their new crop 2014-2015 balance sheet.  So, if the national average yield were to fall short of the USDA's current projections it could tighten the new crop balance sheet, possibly significantly.  For example, if the national average yield were to drop to 163,  2.3 bushels an acre below the current USDA estimate of 165.3, it could mean a 200 million bushel reduction in ending stocks resulting in about a 1.5 billion bushel carry over number.  Now, a 163 yield is still very, VERY good.  In fact it would still be the second highest national average yield on record.  But, what if there really was a minor weather issue and yield dropped a little further?  If the national average corn yield matched last years 158.5 (still the third highest yield on record) ending stocks could drop almost 600 million bushels to just over 1.1 billion bushels.  

At this point it is probably not very likely for a huge drop in yield expectations like in 2012, but lets look at one last scenario.  As we said before 2010 was the last time we had crop conditions at or above what we have now, 77% and 75% respectively.  The final national average yield in 2010 was 152.8, the fifth highest on record.  At this number new crop corn ending stocks could drop 1.05 billion bushels under the current USDA demand estimate.  This would leave us with about 770 million bushes for ending stocks.  This would be a very tight number and would demand price rationing.  Ultimately the ending stocks number would not fall that low as higher prices would cut back some demand but the key here would be higher prices, maybe sharply higher.  

So, although the corn crop is in very good shape right now this crop is far from made.  It would seem to me that it may be a bit early to consider the USDA yield estimates, and therefore new crop balance sheet, a done deal.  This should make the corn market very sensitive to any possible issues in a weather forecast.  So far there have not been any issues, but it is pretty rare that we get through a whole growing season without at least a scare at some point.  And, there are now some weather forecasts that are getting drier after this week.  Really, some drier weather would not hurt the corn crop if there is rain behind it, but if there isn't....  Because of this corn could be getting close to carving out a low for now.  I would think there should still be some weather premium left in the market at least until we get through pollination.  And if there really is a weather issue this year, look out.  

We have awesome CRB wall charts to give out! (US only)  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.

How Important is this June WASDE Report?

Jun 10, 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.       

As this June 11th USDA WASDE comes and goes I find myself asking the question - will this report have a lasting effect on the grains markets?  As usual the USDA will update their balance sheets to show us how supply and demand are getting along and help determine what grains prices need to do.  However, this month's WASDE report may not be the most important report of the month and many of the numbers on this report may change dramatically in the next few weeks.  

The June 11th USDA WASDE report will be looked at to get a grip on the old crop situation in corn and soybeans.  As we come to the finish line for this last marketing year the question is how tight will corn and soybean stocks be for the next few months.  Old crop soybeans in particular have had a tightening balance sheet and this has added a lot of support to the soybean complex and the grain complex as a whole.  Corn too has seen ending stocks estimates fall from over 2 billion bushels to just 1.15 billion.  However, this report will be the USDA's best guess on the current stocks situation rather then a hard number.  The June 30th Quarterly Grain Stocks number will give us a much better idea of where we stand as far as corn and soybean stocks from now until the new crop is ready for harvest.  

This may be the last report where old crop soybeans have a chance to shine.  As the July contract approaches expiration market participants will have a hard time expressing bullish enthusiasm for old crop beans.  There are August and September soybean contracts but the volume there is very low comparatively speaking.  

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    

As far as new crop corn and soybeans are concerned this report may have very little significance in the long run.  There are two key factors in determining the supply side of the balance sheet - acreage and yield.  The national average yield will be determined by the weather in the months to come and may change dramatically from the USDA projection on this report.  The acreage number the USDA uses for the June WASDE report is the Prospective Plantings number that we saw in April and acreage may have changed significantly since then.  The new acreage numbers will be released on the June 30th Planted Acreage report and this will be the numbers the USDA uses going forward.  As far as demand is concerned, while it is interesting to see what the USDA sees for demand for next year we are still months away from beginning the next marketing year and demand will depend on how big the crop is.  If we have a huge crop and low prices demand will be stronger and if we have a short crop and high prices demand will be weaker.  Here too the USDA is really just taking shots in the dark from this far out.  

So, this may be the last report where old crop soybeans are in the spotlight.  Aside from the old crop soybeans situation many of the key numbers in this report can change dramatically in a short amount of time.  This sets the table for 2 key reports in a row with the June 30th Quarterly Grain Stocks and Planted Acreage report and then the July WASDE report which will reflect the new stocks and acreage numbers from the June 30th reports.  Both of these reports have the potential to be big market movers and could have a lasting effect on the market.  While this June 11th USDA WASDE may be an interesting report for old crop soybeans much of the rest of this report may be old news in a few weeks.  

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.

What is the Big Move in Soybean Spreads Telling Us?

Jun 05, 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.       

Soybeans have been under pressure in the last two weeks with most of the pressure starting in the new crop November contract.   Until recently the old crop July contract had been reluctant to come down, but in the last few days has begun to catch up.  What does this move in the old crop - new crop soybean spread tell us?  

Both July and November soybeans put in their current high on May 22nd.  Since then old crop July soybeans are 74 cents off of highs while the new crop November soybeans ar3 69 cents off of highs.  From a pure amount basis these numbers are pretty much the same, but from a percentage basis this is a much bigger drop in new crop November soybeans.  From a fundamental point of view this would make a lot of sense as the fundamentals for new crop November soybeans are quite bearish while the fundamentals for old crop July soybeans remain bullish.  However, the way this spread has held up during a move to the downside goes against what we would expect spreads to do in a move lower.  

Weakness in the soybean complex began with the new crop November soybean contract.  With the USDA projecting a massive soybean crop this year and some of the largest soybean stocks we have seen in recent history the fundamental set up for new crop November soybeans has widely been seen as a bearish set up.  However, planting delays had the market questioning the potential for the USDA's projections.  But, once we were able to get more then 50% of the soybean crop in the grown pressure started to build and has continued to build as planting has rolled along smoothly.  In the mean time old crop July soybeans had been reluctant to come down due to continued concerns about the tight US supplies from now until harvest.  

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

Today the old crop July contract made a big push to play catch up with the July-November spread coming in 15 cents.  The question is what does this mean?  The answer could be twofold.  For one this is more like what we would expect to see spreads do on a move lower.  A bear spread is selling the front month, in this case July soybeans and buying the back month, November soybeans.  Another factor that could be coming into play here is that while the new crop November contract has already broken some key technical support levels July is just beginning to now.  This could have speculators looking to get out of long positions in old crop July contracts, but it also may mean that speculators are now looking to get out of bull spreads which could add some temporary support to new crop November contracts.  

Spreads have been a favorite of speculators in the soybeans lately as they offer lower margin requirements and can mean less risk in volatile markets.  It seems likely that many speculators, large and small may have used bull spreads (bought July and sold November soybeans) to gain access to the long side of the bullish old crop soybean story.  Now that this spread is coming under pressure it could be suggesting that soybean prices as a whole could be positioned to go lower from here.  It could mean that we will see more unwinding of bull spreads in the soybeans which could put a significant amount of pressure on July soybeans.  And, since the July contracts have been the strength in the soybean complex it could mean that the complex as a whole is positioning to move lower.  It also means that speculators could choose to bear spread the market and sell July and buy November soybeans but we see this as being less likely given the bearish fundamental set up in the new crop November contract.  

So, the recent activity in soybean spreads could be hinting at more downside in the soybean complex to come.  Speculators are looking to get out of long positions ad at some point may look to get short.  In the mean time you have a lot of interest from producers and commercials is selling the bearish new crop fundamentals.  This could mean that the relative strength we saw in the new crop November contract may be short lived, but it also may give producers a little time to get some more sales made above the $12.00 level in November soybeans.  

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 

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.

Is This the Year Corn Sets a New Record Yield?

Jun 03, 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.       

The USDA is counting on corn to set a new national average yield this year for their new crop balance sheet.  Crop progress as of the 1st of June shows planting now ahead of the 5 year average and crop conditions are very good.  The corn crop is off to a good start, but how realistic is it to be expecting a new record at this point?  

The current record for the national corn yield is 164.7 which was set in 2009.  The USDA's current new crop balance sheet is assuming a 165.3 bushel per acre national average yield.  This is their trend line yield set forth in the February Baseline conference.  So how accurate have trend line estimates been?  From the mid 1990s to the mid/late 2000s trend line yield only strayed from trend line by more then 1 bushel an acre twice, in 2004 when yield was about 10 bushels an acre below trend line and in 2004 when yield was about 14 bushels an acre above trend line.  Since 2008 however, final yields have been all over the place with 4 of the last 5 years falling below trend line yield.  This could be an anomaly, or it could be the beginning of a trend where yields vary wildly like they did back in the 1980s.  This could all possibly be tied in to long term weather cycles.  

As far as weather is concerned we have certainly had our issues this year as well.  A bitterly cold and snowy winter took some time to release most of the Midwest from its frigid grasp.  Planting progress started very slow especially in the northern areas.  Rain has also been an issue with many areas not getting a chance to dry out to get into fields.  But, lately temps have gotten much better and a lot of progress has been made.  At this point we are ahead of the 5-year planting pace in corn, beans and spring wheat.  Corn conditions are very good at this point with 76% of the crop rated good to excellent.  This is tied for the second best June 1st crop rating in the last 30 years.  But a good crop rating on June 1st certainly does not guarantee record yields come harvest.  

Going forward weather forecasts look nearly ideal.  For now the 2-week forecasts look unthreatening and even the long term forecasts are friendly.  Most of the long term forecasts are looking for an El Nino cycle during the North American growing season which can produce favorable growing conditions.  Some weather analysts are comparing this year to 2009 which again was the last record national average yield for corn.  

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  

Another positive factor for corn yield is where corn acres are being planted this year.  According to the USDA prospective plantings estimates we are planting less corn this year.  The bulk of the reduction in corn acreage is coming from areas that are historically lower producing areas.  For example, North Dakota is reducing corn acreage by almost 1 million acres, maybe more after the slow planting pace.  But your historically higher yielding states like Illinois, Iowa and Indiana are staying mostly the same on corn acreage or could even be adding acres as they got of to a fast start on corn planting.  So the location of corn acres this year could help the national average yield.  

However, long term forecasts are far from reliable.  There are lots of things that could happen this year to put a dent in the expected trend line yield.  Sitting here on June 3rd it occurs to me that it may be a bit early to consider a new record national average corn yield a certainty.  Most likely there will be weather scares if not actual weather problems.  When all is said and done this corn crop could set a new record yield but it may be a bit too early to expect it.  What we maybe should expect is some weather volatility this year.  With less acreage and the USDA expecting a record yield it puts a lot of pressure on the corn crop to produce this year, any hints of weather concerns could be met with strong reactions from the market.  

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.

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