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.

March USDA Report Thoughts

Mar 07, 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.   

Tomorrow the USDA will release updated balance sheets for the grains.  However, with the Quarterly Grain Stocks report coming out on the 28th I wonder how much the USDA will want to make changes rather then wait to get a better read from the stocks report.  If there is a surprise it could be a lower then expected carryover number in the soybeans as export sales have remained very strong.

The trade guesses are looking for a slight decline in soybeans stocks and a slight increase in corn and wheat stocks.  The increase in Corn stocks could be coming form ethanol demand falling behind the pace needed to reach the USDA target.  Lower wheat stocks could come from a small decrease in export demand.  Soybeans could have an interesting report as export sales have remained strong for longer then expected with South America entering the global picture slower then expected.  Soybeans are very close to reaching the current USDA export projections and it is only the first week of March.  Logic would say that the current USDA projection is much too low.  This may be the case, but keep in mind that once South America is up and running our exports could fall to near zero and some of the sales we have seen recently could get canceled or switched to Brazil.  So it will be interesting to see how aggressive the USDA will be at this time.

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

South American production and world carry over numbers will also be a factor on this report as the USDA tries to sort out the South American crop.  Another interesting item will be feed demand.  It seems to be widely agreed that feed demand is stronger then current USDA projections, however it is unclear if corn or wheat is the bigger benefactor here.  Traditionally higher feed demand would go to corn, but with old crop corn trading over wheat it could be enticing producers to switch to feeding higher protein wheat at a lower cost.

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 May Corn Daily chart:

May Soybeans Daily chart:

May 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=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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