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.
The large speculators (i.e. funds) have been carrying a short corn position for some time now. With corn showing signs of strength in the last few weeks it was a big question as to how the funds would respond. So far this week they have responded with a significant amount of selling. Estimates are that the funds sold roughly 8,000 contracts on Monday and another 14,000 contracts on Tuesday. How long will the funds defend their short position?
After buying back some of their short position last week fundswere estimated to be net short 148,000 contracts of corn coming into Tuesday when theysold another estimated 14,000 contracts. Rains in Brazil have helped their second season corn crop and put early pressure on the corn market. Also, after a strong week last week corn ran into stiffchart resistance which opened the door for technical selling.
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Going forward we are getting into a time of year where corn could see a bit of a spring recovery like we have seen in each of the last 4 years. Last year corn rallied nearly 80 cents in the spring, but that had a lot to do with late season problems in South America and some weather forecaster calling for a hot and dry US growing season. While I do not believe that this is a year where the corn market needs to (or wants to after last year) put in a major weather premium I do think that maybe the worst of the fundamental news might be behind us for now until we know what this nextcrop looks like.
Weather delays are another potential issue for the corn market. While corn planting is a little bit behind it might be a little too early to get excited about it just yet. As of Sunday the corn crop was 6% planted compared to 9% on average and 12% this time last year. And, the 2 week forecast has some concerning weather for many areas. However, we have seen in recent years that corn can get planted fast once we are given a window of opportunity.
For the moment we should assume that the 90 million acres estimated in the Prospective Plantings will get planted. However, there may be some other longer term implications form the early planting delays we are seeing. Some analysts thought that if we got off to an aggressive start to planting that we could see an additional 1-2 million acres of corn go in. The possibility of that is slipping away with each day producers are kept out of the field. So, while it is likely too early to get excited about planting delays theidea that corn acreage may not be growing by much (if at all) could be a supportive factor longer term.
This can be a difficult time of year to push a large short position especially if concerns about planting delays are growing. For now the funds seem to be very content to defend their large short position, but it will be interesting to see how long they want to push it. If the funds were to cover nearly 160,000 short positions that could help add to a bounce at some point.
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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.
MayCorn Daily chart:
MaySoybeans 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.