Sep 2, 2014
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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 Springboard off Lows

Jan 15, 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.   

Grains have enjoyed a sharp rally in the wake of the January USDA reports.  It has been a tough trade however with a sharp contrast between old crop and new crop corn as well as a bear trap in the soybeans.  Going forward it would seem that there should be a solid floor under old crop corn due to the tight stocks but the rest of the grains have a more cloudy future.

With a 602 million bushel carry over for 2012/2013, it would seem logical that old crop corn should sty firm into the last few days of the current marketing year.  There certainly is a need to keep prices high to ration demand.  The question is how high?  Is there a need to best the drought stricken summer highs?  At this time I do not subscribe to that school of thought.  Demand has remained slow with the historically high prices.  We did see a surprise increase in corn use for feed and residual but demand for exports and ethanol remains weak.  However, exports may pick up on a rally as buyers shift their mentalities from "wait for lower prices" to "gotta buy now before its gone".  If that is the case we may really have a need to further price ration corn at least until the Argentinean harvest.  Argentina, by the way, increased their corn production estimate to 30 million metric tons up from 28 million.  The USDA increased their estimate for Argentina by 500k metric tons on last Friday's report to 28 million.  South America has a tendency to underestimate their crop to keep prices up for their harvest so I wonder how much corn there really is in Argy.  This may end up being what bails us out of our tight balance sheet.

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New crop corn is a different story.  Even with the surprise higher demand for feed/residual use, overall demand is relatively weak.  And, if we do have a halfway decent growing season next year we may have to see corn prices extend to the low end extreme to buy back global demand.  Now, there is certainly a possibility of another drought year but it is much too early to assume that will be the case.

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

March Corn Daily chart:

March Soybeans Daily chart:

March Wheat Daily chart:

All this means that speculators should be looking for opportunities and producers need to look to lock up some prices while we have corn near $7.00 and soybeans near $14.00. 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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