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.
In the last few years we have seen a trend of corn acres shifting to soybean acres. Last year we had a decline in corn acres while soybeans had record acres in the US and South America. This year the trade and the USDA expect more of the same. The most recent USDA estimates are 89.2 million acres for corn (lowest since 2010) and 84.6 million acres for soybeans (a new record). As we slowly get into planting soybeans are making a last minute bid for even more acres likely at the expense of corn.
Strong soybean demand in the last few years had kept soybean prices relatively high compared to corn. The market has responded with increasing soybean acreage both domestically and abroad. The US planted record soybean acreage last year and South America seems to set new soybean acreage records year after year. This trend is continuing as we get into the US growing season with another large shift of corn acres to soybeans expected. Relatively strong soybean prices in the last couple of years have suggested the need to add soybean acreage, but at what point do we overshoot the mark? This could be happening this year as projected global soybean stocks would be a record by a long shot. However, we may need a year with relatively low soybean prices to slow down the trend.
Price is not the only factor in determining planted acreage, but it is one of the most important factors. Just in the last few days soybeans have made a last minute push to add even more acreage. As of Thursday afternoon November soybeans are up 8 3/4 cents for the week while December corn is down 8 3/4 cents. This may have an impact on producers that are on the fence, or that have been late getting corn planted.
Price is not the only factor that is encouraging more soybean acres at the moment. In the delta and the southern Corn Belt wet, cold conditions are keeping some producers from planting corn. In some areas the window of opportunity will be closing soon and soybeans may become the better option. In the North and the West dry conditions have producers concerned about yield potentials this year. This could be encouraging producers to look at planting more beans and less corn as well. Soybeans have a smaller cost of production on a per acre basis so they may be seen as the less risky crop to plant this year. In the Eastern Corn Belt subsoil conditions are much more favorable, but here too a cold and wet start may develop into planting delays if the weather pattern does not change soon.
We have some complimentary 2015 commodity reference calendars available. They are a little bigger than pocket sized and very useful if you follow markets. You can sign up for yours here - http://www.zaner.com/offers/calendar.asp
With global demand for soybeans growing global production needed to grow as well. The market uses price to encourage this, and this seems to be working. However, if both the US and South America have average growing seasons on record acreage we could be getting to the point where global production is growing faster than global demand. This may not have happened yet and we still have two growing seasons to get through to see if this is the case. So, for now soybeans still seem to be on a mission to get as many acres as possible. But, much like corn in the past few years, the market at some point may need to work to give back some of the acres that have switched to get back in line with global demand.
Please 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.
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. Also, follow me on twitter @thetedspread if you like.
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. 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 [email protected]
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.