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.
Next Tuesday the USDA will release their monthly WASDE (World Agricultural Supply and Demand) report. This particular report is significant because it will update South American production and give us a first look at the USDA balance sheets for the crop that is currently getting planted. For corn we are likely to see some very big stocks from the USDA. But, with larger than expected acreage on the Prospective Plantings report how big of a crop is already factored in?
We are one of the firms that gets polled by the 3 major news outlets for our expectations for USDA reports. For this report we know that the USAD will stay pretty close to the acreage numbers reported in the Prospective Plantings report and the yield numbers reported in the Ag Outlook forum. This means that while there is a little wiggle room on the production side of the balance sheet the bigger question is what the USDA will do on the demand side. From what we are seeing it will be very difficult to see a new crop corn carry over under 2.150 billion bushels. Historically speaking, this is a vary large corn carry over.
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However, when the USDA shocked the market on March 31st with a 5 million acre increase in corn acres (year over year) expectations may have been set for a very large corn carry over. At 93.6 million planted acres of corn the USDA gave us a number that was about 3 million acres above expectations. Add that to the 168 bu/acre trend line yield that the USDA established during the Ag Outlook forum back in February and we pretty quickly were able to figure out a general idea of what the USDA would be looking at for corn production. So, in the last few weeks we may have already factored in a large crop and large corn stocks.
While it seems rather unlikely that we will see a wildly bullish number for corn from the USDA next Tuesday it might not be much worse that what the market is already expecting. Seeing a big production number and a big carry over number on paper could certainly throw a wet blanket on the market but it may not be a good reason to go make new lows in corn unless it is much more bearish than expectations. If the USDA estimates corn production and ending stocks within the range of guess we could pretty quickly start talking about how we may have seen some acreage shift away from corn since the Prospective Plantings survey was taken and how current long term weather forecasts could make it difficult to hit the USDA's trend line yield.
The expectations should be set to see bearish numbers for corn from the USDA next Tuesday, but the numbers may not be terribly bearish compared to expectations. While it is difficult to imagine this will be a wildly bullish report we might have to wait to see what weather looks like as we get into the heart of the growing season before corn needs to go down and make new lows. Either way this will be an interesting report and will set the tone for months to come.
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Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action. Ted Seifried - (312) 277-0113. Also, 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. Follow me on twitter @thetedspread if you like.
May Corn Daily chart:
May Soybeans Daily chart:
May Wheat Daily chart:
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 firstname.lastname@example.org
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.