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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.

Grains Not Sure Which Way to Turn on Turnaround Tueasday

Nov 13, 2012

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.   

Personally, I was disappointed with the lack of changes on last Friday's USDA report.  However, it seems we did not need a flood of new US news from the USDA to get these markets to move.  The world stocks estimates did the trick but it was a bit of a delayed reaction.  The large increase in world ending stocks, especially in soybeans and wheat, highlight the concern of slowing global demand and the potential for a monster soybean crop in South America.

The grains started today higher from the night session showing us a classic "Turnaround Tuesday", but shortly after the pit open the trade turned again and started to sell off.  The sell off was also short lived as Jan soybeans broke $14.00 but couldn't find any follow through and corn broke yesterdays lows at $7.12 1/2 but also could not find any follow through.  So in fine Turnaround Tuesday form we turned once again rallied into the close.  The positive closes in corn in beans after making new recent lows leaves us with a mild buy signal however with poor demand for corn and good weather in South America the fundamentals still seem to be pointing down in the long run.

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With corn closing up 5 cents, soybeans up 4 and wheat down 6 3/4 today does not look like much from the settlement prices, however the range was big and this Turnaround Tuesday (also Taco Tuesday in some circles) could be forecasting a more bounce to come in the short term.  Longer term the outlook is a bit less bullish.  Large global end users for soybeans will be watching South American weather closely and unless some issues develop I would imagine that they will buy as little soybeans as possible until the flood of cheaper SA soybeans hit.

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Corn still has terrible demand figures and even with this mornings 156k MT sold to "unknown" exports are very poor at a time of year that they should be very strong.  We will se new cattle on feed numbers on Friday, but last months figures were the lowest we have seen since 1996, and ethanol production continues to be a loosing venture suggesting that ethanol producers would like to slow production.  Speaking of which, I wonder if now that the election has come and passed if we are going to hear more about the decision on the ethanol mandate that was supposed to come by next Friday.  That could sure be a wildcard.

With high volatility in a market, option strategies may be a good tool for hedgers and specs alike.

December Corn Daily chart:

January Soybeans Daily chart:

 

 

December Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have new crop corn above $7.00 and new crop soybeans above $15.00. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent.

Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs.

Be safe!

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

Please check out my Blog at: http://tedseifriedfutures.com/

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

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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