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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.

South American Soybeans Headed to the USA?

May 09, 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 2012/2013 and give us numbers for 2013/2014 for the first time on a WASDE report.  By no means is this a small report.  There are lots of numbers, and this report could set the tone going into the growing season.  So obviously we will be looking at that very closely tomorrow.  However, on the eve of the report, rather then going in and taking guesses on what the report is going to say like so many other analysts I thought I'd touch on something that not many people are talking about right now - US imports of South American Grain.  

Early this morning we were hearing rumors of 3 cargos of South American soybeans headed to a US destination.  The market either did not notice or didn't care as soybeans lead te way higher.  If these rumors end up to be true this could put a significant amount of pressure on soybean prices.  Our tight old crop balance sheet could be offset by imports and the need for price rationing could fall to the wayside.  Cash basis could stay supported in the interior far a while, but futures prices and gulf basis would suffer.

Then mid day I got an email from one of our clients in Uruguay who has been a trusted and very reliable source...  

- Its confirmed that the first ship is loading beans from Paraguay and Uruguay with a USA port destination.  

If this is true, which again sounds likely, this could be trouble for soybeans prices going forward.  If south America selling soybeans to the US then the market at some point soon push the agenda to see how low soybean prices need to get to stop US imports and then rebound slightly above that price.  In other words, the market will push to find the lowest price possible from South America, get just above it while we need imports and then break below it once the pipeline is fat with soybeans, South American or otherwise.  The other factor here it the US$.

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The stronger the US$ the more purchasing power we have in Brazil, Argentina and Uruguay.  If these sales were booked before today which the surely were, then the case for importing South American soybeans got much stronger today as July soybeans were up 18 cents and the US$ Index was up 86 points.  This is a double whammy that could bring on a flurry of activity.  

So now I'm wondering - if tomorrows USDA report does happen to be bullish old crop soybeans if any positive reaction would be short lived.  I think I might have my finger on the sell trigger as I am sure South America does. 

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

If you are looking for ideas or want to talk strategy feel free to give me a call or shoot me an email, you will find my contact info below.

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 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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