~~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.
Post January USDA report has been a tough world for grain markets as funds have started to liquidate positions. However, next week is a very important week for grains going forward. Most of South America has been dry the last 10 days and although this has been beneficial for many areas rain is needed in the near term to prevent any major crop stress.
At the moment any major stress is limited to the North Eastern portion of Brazil where yield potential is under pressure. However, this is not a major corn and soybean producing area and here should be getting close to maturity. Any yield reductions in the area currently affected by stress should have little impact on overall production.
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The rest of Brazil and most of Argentina have had mostly favorable weather with a few areas being too wet. With limited rain in the last 10 days the dryness has been mostly beneficial but at this point stress will begin creeping into a much larger area if rain does not come soon. The current forecast has good rains for January 21-27. This will be key for South American production, especially for soybeans, as crops are getting into key moisture sensitive stages in many areas.
This sets up a big week for grain markets next week. If South America gets the advertised rains for next week most crops will be all but made. However, if they were to miss out on some or all of the rains we could find corn and soybeans right in the middle of a weather market. It could be the case that if the rain is still in the forecast upon returning from a long weekend markets will be down sharply. On the other hand if the rain starts to fall out of the forecast markets could rebound strongly.
It would not be terribly surprising to see markets firm a bit in front of the three day weekend on uncertainty over the South American forecast. But the weather in South America next week may a large input for market direction going forward. If they get the rain it becomes even harder to argue with the idea that a record world soybean carry over is inevitable. If they do not get the rain we could have to make up the difference with US exports and we could run out of soybeans again. So, buckle up this wild ride may not be quite over yet.
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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 [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.