TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY 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 the US shipped out a little over 100 million bushels of soybeans. This was a record export week and export sales continue to roll in. With strong export demand what does this mean for prices going forward?
To put last week in perspective... We shipped over 100 million bushels of soybeans in a 7 day period. Right now the USDA is forecasting a 395 million bushel carry over in 2015/2016. So, we shipped out the equivalent of just over 25% of that in one week. On top of that we are expecting another strong week of export sales with over 700,000 metric tons reported on the daily wire alone. What does all of this mean?
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While it seems certain that this year is a record production year for soybeans we also are seeing a record pace of demand. Even with the best soybean crop we have seen in the US it is obvious that the USDA's projected carry over of 395 million bushels may not be enough of a cushion in case there was a weather issue in South America or the next US growing season. With export numbers like we saw last week we could theoretically be cleaned out of any carry over in a matter of weeks if there was a reason for global end-users to need to buy more US beans.
With expectations for Brazil to produce a 102 million metric ton crop, even though acreage is not increasing dramatically, there is now a lot of pressure on the South American growing season. It will take nearly ideal weather as Brazil as not yet topped 102 million metric tons. Any thing short ofa recordcould drive more business to the US.
On the other hand, there are some analysts who feel that the US national average soybean yield is still too low which could add a much bigger cushion for a weather problem. However, from reports we are hearing the best soybeans were the early planted/early harvested soybeans... If the US national average yield is not much higher than the current USDA estimate of 51.4 (which is a new record by 3.4 bushels an acre) we may need to add a weather premium as we get in to the SA growing season.
We have some complimentary 2016 commodity reference calendars available. They are a little bigger than pocket sized and very useful if you follow markets. (Shipping to the US only)You can sign up for yours here - http://www.zaner.com/offers/calendar.asp
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.
DecemberCorn Daily chart:
NovemberSoybeans 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 [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.