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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.

Are Corn and Soybeans Carving out Harvest Lows?

Oct 17, 2013

 

TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.        

The bounce off of lows in corn and soybeans has been mostly linked to harvest delays and possible export sales.  Are markets carving out harvest lows?  Or is this a chance to sell?  

Wet weather in the last week has caused harvest delays in many areas.  Without updated harvest data from the USDA  it is difficult to tell how far along the corn and soybean harvest is.  We should get an update on Monday, but it seems unlikely that harvest progress has reached 50% in soybeans or even 40% in corn.  Much of the recent strength in corn and beans has been driven by cash markets.  This is happening because the market wants more cash grain to become available.  Remember, we are coming off a drought year that saw tight balance sheets and the market is counting on fresh supplies being available - now.  So the market is adding incentive to bring cash corn and beans to the market, it doesn't care about rain delays, it wants what it wants and it uses higher prices to get it.  

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

End users seem to be getting a little impatient as well.  While the USDA was away we really could not tell for sure who was buying what or how much.  We did see a good amount of grain leave ports, and a good amount of that was headed to China.  What we do not know for sure right now is how much of that was new business, or how much had been on the books for some time.  Without knowing the natural reaction is - its all new business!  But that is probably not the case.  We will hopefully get a better idea with tomorrows USDA export sales report.  

We will however still have to wait until November 8th to get an updated balance sheet from the USDA as they announced today that they would cancel the October USDA WASDE.  This is a long time to wait for fresh estimates and a bad time of the year for the markets to be "flying blind", but the good news is that the extra time should give the USDA time to get into fields and hopefully give the market some accurate figures.  

It seems likely that this recent bounce off of lows in corn and soybeans could be short lived.  As weather gets better and the harvest picks up again it is certainly possible to see new harvest lows.  It seems likely that harvest is well below 50% complete for both corn and soybeans and if that is the case there should be quite a bit more harvest pressure to absorb.  The big question is what ending stocks will look like, especially for soybeans, but we will still have to wait for answers.  At least know we know how long we will have to wait.  

In the mean time this recent bounce could be an opportunity to sell for producers who have unsold or unhedged grain, at least for bushels that were intended to be sold in the short term.  

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

Feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.   

December Corn Daily chart:

November Soybeans Daily chart:

December Wheat Daily chart:

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