Sep 18, 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.

Is there Cause for Concern about the Soybean Crop?

Aug 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.       

After a week of fairly wide spread rains the soybean crop conditions came in at 70% good to excellent.  While this is still a very good rating for this time of year it is actually a 1% decline from the previous week.  There has also been a lot of talk about diseases popping up this week.  Should we begin to worry about the soybean crop?  

As of the week ending August 24th the USDA NASS reports the soybean crop condition at 70% good to excellent.  The biggest drop came from Kansas where conditions were down 5% in the G-E category.  The biggest improvement was in North Dakota, up 3%, while 4 other states improved by 2%.  Overall this is the time of year where we expect conditions to begin to decline, but with corn up 1% and all of the rain last week some analysts thought we could see one more improvement.  

The drop in conditions may be somewhat attributed to SDS, white mold and other diseases.  There has been a lot of talk this week about SDS (sudden death syndrome) in particular.  Even though the pro farmer crop tour last week did see some SDS it was not a big topic of conversation in their yield assessment.  Reading between the lines it may be that this is the reason such high pod counts did not translate into a much bigger yield.  And, SDS at this point in the growing season may not have a huge impact on the national average yield.  As a soybean producer in Indiana put it - "August 26, meh.  July 26 it's a catastrophe.  We get it every year here, kinda used to it now."  

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On the other end of the spectrum, the North Dakota crop is looking great.  In most years this would not really mean a whole lot, but rail issues and the nations worst corn basis has encouraged a 1.35 million acre increase in soybeans according to the NASS.  This gives North Dakota the 4th most soybean acres in the nation this year behind only Illinois, Iowa and Minnesota.  North Dakota's soybean crop conditions are 75% good to excellent.  Many years ND is a drag on the national average soybean yield but this year they could really help push it higher.  

The bottom line is that at this stage of the growing season SDS, white mold and other diseases may not have a huge impact on national average yield.  This may put a bit of a cap on the upside potential, but crops in the northern states, North Dakota in particular could offset or even more then offset any yield reductions in the I states.  Weather and crop conditions will need to be monitored closely however as an early frost or a much more widespread SDS issue would have an impact.

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.     

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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