Sep 30, 2014
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January 2014 Archive for 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.

Buying back Corn Demand

Jan 30, 2014

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.        

When grain prices soared to new highs in the summer of 2012 it had a lasting effect on markets.  High prices encouraged increases in planted acreage on a global scale and discouraged global demand.  Corn is now faced with growing global supplies and a softer demand base.  What this means is that the corn market has a job to do, or an agenda if you will, to find a balance between global supply and demand and prices are the most direct tool to achieve this.  

Prices go higher or lower for a reason.  In the case of the summer of 2012 corn prices had to go higher to slow down demand because drought cut our production short.  Higher prices were necessary to "price ration" demand.  In other words corn prices had to go higher to slow down demand because otherwise we would have run out of corn well before the new crop arrived.  Price rationing in corn succeeded in slowing down demand enough that we did not run out of corn.  Since 2013 corn prices have come down because corn supplies have increased after a better growing season.  As corn supplies have increased the need to get the lost demand back has increased as well.  So now the mission of the corn market is to encourage demand to grow and start to chip away at the big supplies.  

To this point the corn market has done a fairly good job of buying that lost demand back.  This week we were reminded of this with a huge weekly export sales number.  In fact corn demand for feed, ethanol and export has risen sharply from where we were a year ago.  The current USDA ending stocks projection is 1.631 billion bushels.  A few months ago the market was concerned that corn would have over 2 billion bushel of ending stocks.  This really highlights how demand has rebounded with lower corn prices.  But, while the lower trend in ending stocks estimates is moving in the right direction the current USDA projection is still on the historically high end of the scale.  

The question now is - what would happen to this newly rebuilt demand base if corn prices were to go higher?  Well, there is really only one certain way to find out and that is to see what happens when corn prices go higher.  Many times there will be a flurry of corn buying by end users at the onset of a rally as they work to fill their immediate needs before prices go higher.  It is what happens after that is the big question.  Will feed lots continue to feed as much corn if prices were fifty cents higher?  Would ethanol plants continue at this pace?  Would export sales remain strong?  

Again, there is really only one way to find out for sure - higher corn prices.  And, now that thoughts of a 2 billion bushel ending stocks number are behind us corn may very well just try to answer this question.  There are a few reasons why corn may try to push higher in the near future, for one there is a record amount of corn being held on farm with producers holding on tight waiting for higher prices.  The corn market may need to try to buy bushels out of the hands of the producer.  This is a double edged sword however as when all this corn comes to market it will put pressure on prices and this could cause an avalanche of sorts.  This certainly concerns me, but for later in the marketing year.  

So, if corn were to rally 40-50 cents how would this effect demand?  Well, if I had to take a guess I would say that it would have a big impact on demand.  We saw how fickle demand is in the current global economic situation when corn was able to price ration better then we expected and at lower prices then we expected in 2012-2013.  This is not like 2008 when higher prices did not have much of an effect on demand because collectively we were all willing to pay up to get what we wanted or needed.  Now, we are mostly on a tighter budget looking to cut things out if they cost too much.  The same likely goes for global grain end users.   

I would think that corn demand could be a very fragile thing this year and maybe for a few years to come.  If I were right about that any rally in corn would be limited to the point where we started to see demand fall off.  What is that point?  Again, there really is only one certain way to find out, but I would suspect that if corn were to approach $5.00 demand would soften dramatically.  So, my advice to producers would be to sell a bit of cash corn on bounces and try to average in a price.  At the same time I would recommend some sort of inexpensive floor in case the corn market decides to scare producers into selling their grain by sharply lower prices.  Unfortunately sharply lower prices are sometimes the better motivator of cash movement so we are playing with fire a bit by holding record amounts of corn on farm.  

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

In the short term corn may want to go test its boundaries and see how elastic or inelastic demand is.  However, corn demand is likely fragile so bounces my be limited.  One way to find out, and now that the worst of the burdensome supply talk is behind us we just might find out.   

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.     

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. 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

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

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.

Is this the Calm before the Storm in Grains?

Jan 28, 2014

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 markets seem rather indecisive to start the week even though there is a lot of "big picture" news swirling around.  Something tells me this is just the calm before the storm, but for the moment grains seem to be lacking much of a sense of direction.  

Macroeconomic issues are getting a lot of air time on the boob tube as the usual suspects rant on and on about the Fed meeting and global economic concerns.  Certainly these are issues that can and will effect the grains markets but even the markets that are very sensitive to these sorts of things are unsure of what to do.  For example, the S+P index was sharply lower Friday, all over the place yesterday and higher today.  What are we supposed to take away from that?  If the world is headed for a big economic downturn that would have a bearish effect on grains markets, but is this a real threat or just the latest hype from the media?  

Weather, as always, is a big factor for the grains markets.  As we all know (the other super hyped news flash de jour) it is cold in most of the US but especially in the upper Midwest.  Polar vortex, we made a new term for - darn it's cold...  Well, the cold weather is causing winter kill fear for wheat, river traffic to slow to a screeching halt and increased feed demand because livestock need to eat more to compensate for energy lost while trying to keep body temps up.  Ultimately these could be short term bullish issues as the impact might not be big enough to really change the balance sheets.  

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

South American weather is probably the bigger factor.  Now that Argentina's weather has taken a turn for the better the biggest concern will be harvest conditions.  Any harvest delays could cause world end users to continue to buy US grain which could dramatically tighten the domestic soybean balance sheet.  This could cause the need for higher prices and price rationing to slow export demand.  For the moment the forecast looks good but we will be watching closely for any changes in the outlook.  

Finally, a story that has kind of flown under the radar thus far, Argentina is now allowing its citizen to purchase US dollars for their savings accounts.  This could seriously open up some door to global trade in Argentina.  Many countries have avoided doing much business with Argentina because of the uncertainty of their Peso.  It seems possible that Argentina could start selling grain in US dollars.  This could add a lot of selling incentive for them.  

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.     

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. 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

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

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.

One more chance for a Weather Rally in Soybeans

Jan 23, 2014

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.        

Soybeans have been down sharply this week as concerns over Argentinian weather have faded away.  However, soybeans still have one more shot at a weather rally before the monster South American crop takes the US out of the global export market.  

Concerns over hot and dry weather in Argentina fell to the wayside this week as soaking rains fell over the weekend and early into the week.  Follow up rains came later in the week to further improve soil and crop conditions.  Now, Argentina's forecast looks nearly ideal to finish off the soybean crop so at this point it seems that the bullish weather market for soybeans may be behind us.  

There is one more chance at a weather rally however.  Brazil will now become the focus.  The market will now begin to monitor rain in Brazil's forecast closely.  If Brazil were to start getting too much rains harvest delay would occur.  Any major delays in harvest could cause major delays in getting soybeans to ports and loaded on to container ships for export.  This scenario was a big factor last year.  If South America is slow getting product to port it would likely mean that global end users would need to continue to buy US soybeans to fill their needs.  

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

Last year harvest delays in South America were significant.  This seems to catch China and other global end users empty handed and they scrambled to buy US soybeans.  This put pressure on US ending stocks and caused soybeans to rally.  This could happen again this year - to an extent.  

It does seem that global end users have planned ahead a little this year.  It seems likely that at least some of the US export sales to date may have been booked for precautionary measures in case long delays would cause South America to be slow in filling orders.  So, if this were to happen again this year it may not translate into a large inflow of new export sales for the US, but it could mean that more of the sales on the books actually get delivered rather then canceled or switched to South American origin.  

Right now Brazil's weather looks good and we are not currently expecting any harvest delays for the next two weeks.  We have also been told by our South American contacts that they are in a better position this year to move grain due to river terminals coming on line.  We have heard this before, but we are hearing it from a lot more people this year.  

So, if there are harvest delays in Brazil there could be one more chance to sell soybeans at higher prices before the Monster South American crop hits the global market.  Right now the forecast looks good, but the trade will be watching this situation closely going forward.  

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.     

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. 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

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

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.

The Soybean Bears are coming out of Hibernation

Jan 21, 2014

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.        

Last week soybeans were attempting to rally back toward recent highs based on South American weather concerns and a strong pace of exports sales.  Soybeans however, were down sharply to start this week as a very important rain event materialized in Argentina and there was talk that China may be done buying soybeans for now.  Until recently some potentially bearish soybean fundamentals had been flying a bit under the radar, but they might now come to the forefront.    

A large portion of the Argentinean soybean crop had been need of relief from oppressively the hot and dry weather pattern that had been dominant lately.  Then Sunday into Monday the rains began to fall.  Follow up rain is in the forecast for later this week.  Now, some areas in Argentina have seen enough stress to permanently cause losses in yield potential, but recent rains will go a long way to salvaging the yield potential of the crop.  

There is also news that China plans to end its soybean stockpile plan.  This could mean that they will be less aggressive buyers going forward, but it could also be suggesting that cancellations and/or switches in origin are on the way for the unshipped sales we have on the books.  Personally, I think China likes to play games with the markets and I am not so sure that they will stop buying soybeans.  But, at least for the moment it seems that one of the biggest bull drivers of the soybean market may have been taken away.  

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

This might leave the soybean market with some less bullish fundamentals to digest.  The South American crop will be coming on line in the near future.  South American pricing is already running well below current US pricing.  So, barring any major logistic setbacks South America is poised to take over the world export market in the near future.  And, the USDA is projecting a huge world carry over in soybeans which might mean that prices may need to go lower to stimulate increased demand.  

The weather market might not yet be over for the soybeans however.  Even though Argentina got some much needed rain they would certainly like to see some follow up rains in February to fill out pods.  And, although Brazilian weather has been near ideal this growing season at some point the market may get concerned about being too wet to harvest of get soybeans to port.  This could extend the US export season, but China may have already made purchases for this reason.   

Delays in getting product to port in South America might mean less cancellations and/or switches in origin but it might not mean more export sales like it did last year when global buyers seemed to get caught empty handed when Brazil was experiencing major harvest delays.  This year it seem that China and the gang have planned ahead and overbooked their needs just in case.  Selling soybeans on bounces may be the way going forward.  The old crop soybean situation has kept prices relatively strong compared to corn and wheat.  This window might be closing however with South America moving toward the finish line.  

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.     

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. 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

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

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.

Is the Low in Corn behind US?

Jan 16, 2014

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.        

Since November of last year I have been saying that I did not think corn would trade below $4.00 for an extended period of time.  When I was saying that last September guys gave me really nasty looks for suggesting that corn would get anywhere near $4.00.  Last Friday, just before the January USDA report, March corn put in a low of $4.06 1/4.  Is this the low for corn going forward?  

It is tough to make a bull case for corn to rally back to $5.50 plus with a 1.631 billion bushel carry over this year.  But, it does seem that we may have already seen the biggest carry over estimate that the USDA is going to throw at us.  So, now that the ideas of a 2 plus billion bushel carry over are behind us shouldn't we now start to see higher prices?  Well, maybe.  

On a very positive note, demand seems to be coming back well at current price levels.  Export demand has been strong and has continued to grow even after a bullish surprise of a USDA report.  Ethanol profit margins are good and corn used for ethanol is running near current USDA projections while ethanol stocks are near the lowest levels they have been in three years.  This means that ethanol demand is good and has potential to grow.  Feed demand is picking up as well.  While there may still be a smaller heard then in years past, weights are picking up and it takes a lot of grain to make that happen.  A colder the usual winter is also increasing the need for feed.  So, demand is growing in all three sectors and chipping away at the large stocks of corn we have at current prices.  

The key to that last statement is at current prices however.  Export demand may stay strong or even get stronger at first on a rally, but feed and ethanol demand are very dependent on low corn prices and may quickly drop off on much of a rally.  Cattle margins are thin and after a couple years of rough times cattlemen will be quick to reduce production if input costs pick up.  Ethanol demand is good because profit margins are good, not because of any mandate.  If corn prices were to really get going to the upside it would dramatically cut into profit margins unless crude prices were sharply higher as well.  Lower profit margins would very likely mean less corn used for ethanol production.  

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

So, the worst of the old crop corn news might be behind us unless corn were to rally significantly.  Higher prices are certainly possible, and maybe likely but within reason.  Too much strength could kill off some demand and put us right back to the 2 billion bushel plus conversation (which breeds the darn $3.33 conversation again).  Corn demand could probably withstand a 30-40 cent rally all other things (crude, China economy, US economy) remaining equal.  

The wild card or potential fly in the ointment here could be soybeans.  Soybean prices have held on to strength as the US old crop soybean balance sheet has remained tight, export sales have been strong and there has been concerns about Argentina's crop.  However, short of a catastrophic event in South America at this point it looks likely that we will see a huge world carry over number this year that could put significant pressure on soybean prices.  If this were the case corn would have to weather this storm.  To some extent I think it could do a good job of it.  The corn-bean spread might have quite a bit of room for corn to gain on soybeans.  And, we have seen soybeans have independent strength from other grains in recent history, so why not corn?  Maybe this is wishful thinking, but I certainly like it better then the alternative.  

Finally, a lot will depend on cash movement.  Coming into this year there was a lot of open storage and guys have come off a string of good profit years so we are not all in a huge rush to sell corn right now.  To an extent that is a good thing as a tight cash market could cause corn prices to rally to buy bushels out of the bin.  However, if a rally doesn't buy bushels the plan b is a nasty one.  Many times if better prices doesn't get cash to move the market will break violently to scare producers into selling.  Hopefully this will not have to happen this year.  The best thing to do might be to sell small amounts on bounces.  

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.     

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. 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

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

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.

Where are All the Soybean Cancelations?

Jan 14, 2014

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.        

For the week ended January 2nd the USDA reported that of the 1.498 billion bushels of soybean export sales 577 million had yet to be delivered.  Many analysts believe that at least some of the remaining bushels could get canceled or switched to South American origin.  But, so far we have not seen many cancellations and export sales have remained fairly strong.  Is China and other global soybean buyers going to cancel or switch some of these purchases?  And, if they are when?  

Many analysts including myself feel that China and other global soybean buyers have overbooked their soybean needs in order to hedge the South American crop in case there were any major production issues.  The thought was that cancellations may occur once it was all but certain that the crop in South America was all but made.  With much of Brazil looking very good and getting toward the finish line right about now is when many analysts were expecting to see the cancellations or origin switches rolling in. But, so far cancellations or switches have been minimal.  Last year may offer some insight to this.  

Last year South America had major logistical and political issues that produced lengthy delays in getting soybeans to the ports and shipped off to their destinations.  A rainy, muddy end to the growing season certainly had a hand in that.  Last year the pictures of miles of trucks waiting in line to off load soybeans was especially dirty (we see these pictures every year just less muddy).  Now, South America always has logistical issues but last year was especially bad and global soybean buyers certainly remember this.  

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

The delays in getting product to port in South America last year translated into an extension of the US export marketing season and this caused prices to rally.  This was of benefit to US and SA farmers alike but was a thorn in the side of global end users.  This year China and the gang think they have out smarted the market.  They have over booked their needs so that they will not get caught empty handed if Brazilian port workers go on strike or Argentinean truck drivers refuse to move their trucks until the get a raise (as they do every year).  This time the plan might be to wait until South America has soybeans on container ships and in the bins at the ports to cancel sales.  And, when they cancel sales soybean prices could fall and this would be very convenient for China and company because they could buy soybeans back at cheaper prices.  

Now, the scenario above is somewhat based on speculation but I could certainly see this scenario playing out.  Global soybean buyers are smart and may have learned for years past.  It could be the case that all of the outstanding US export sales end up getting shipped.  It could happen that the strong export market runs the US right out of a soybean carry over and sends prices back to record highs and beyond.  Or maybe global soybean buyers are using this as an opportunity to play games with the markets...  

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.     

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. 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

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

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.

Jan USDA Report Preview

Jan 09, 2014

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.        

On Friday January 10th the USDA will release a series of reports that will set the tone in grains for months to come.  This Jan report is a big one because it will finalize production numbers from last year and give us major insight to the supply side of the equation going forward.  The USDA will also release Dec 1st quarterly grain stocks which will help determine supply going forward but will also show us how strong demand has been.  Finally the USDA will also update their figures on the South American crops, world balance sheets and winter wheat seedings.  

For the most part the trade is looking for this report to be bearish for corn, wheat and new crop soybeans.  There is a good portion of the trade that is looking for a bullish old crop soybean report and many think that this could help support corn and wheat as well.  Honestly, I was nervous when I published our trade estimates because I thought we would be the most bearish estimates out there (which would officially make me the least popular guy at the party).  But, as it turns out our estimates were dead on average for everything except one area - old crop soybean stocks.  This was a bit of a relief, but not really because it seems that a lot of guys are depending on a bullish old crop soybean report to keep everything from falling under pressure.  

So, lets look at the old crop soybean situation.  Export sales are strong and have been the reason for a tight projected balance sheet and therefore a supporter of prices.  However export shipments, while still about 112 million bushels better than this time last year, are lagging behind the record export sales figures.  From a production standpoint this last growing season turned out to be a surprisingly good year for corn and a bit of a disappointing year for soybeans.  At least this is the idea that the market has been working with for the last few months.  However, the USDA did not have a whole lot to go on when they gave us their crop production estimates in November.  Generally they are collecting data during harvest in September and October to give us their production estimates on the October report.  This year this did not happen because of the government shut down and the USDA was not able to give us a field based production report until November.  Now, for corn there very well could have still been enough unharvested acreage to get a good handle on production, but for soybeans it must have been darn near impossible to collect much usable data at that point.  So, they basically had to take their best guess for soybeans (no comment on their track record of guessing...).  Now that we will get a good look at December 1st stocks we will be able to take a better guess on what production was and it could be much different than the USDA's November production estimate.  

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

This Quarterly Grain Stocks report scares me.  I remember very well last year when the USDA found an extra 400 million bushels of corn on the May 1st grain stocks report and this one could be setting up the same way.  When we got the May 1st Quarterly Grains Stocks report in June of last year we were shocked to see that the USDA had been wrong somewhere and stocks were significantly higher than expected.  This could be a similar situation with the USDA taking their best guess on production last November.  Now we will actually see how close they were.  It could certainly go the other way too.  It could be the case that they were dramatically over estimating soybean production, but with corn coming in so much better than expected I would lean toward a bigger than expected stocks number.  Either way Dec 1st grain stocks could be the biggest number on this report.   

World numbers are expected to jump as well.  Brazil has good weather for most of their growing season and we are expecting a good crop.  A big South American crop would likely mean some of our export sales would get canceled or switched to South American origin.  Not to mention that Brazil's CONAB is projecting a monster soybean crop.  This is coming from a state run agency that has a reputation for under estimating production figures.  It just so happens that this usually keeps soybean prices elevated into their harvest and marketing season.  

One way or another this Jan USDA report is likely going to be a market mover.  There are so many important numbers coming out that something is bound to be a surprise.  I hate to say it, but my gut feeling is that we get a somewhat neutral report for corn and wheat and get a bearish surprise for old crop soybeans.   

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.     

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. 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

Sign up for our Morning Ag Comments: http://www.zaner.com/offers/?page=17

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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