USDA Crop Report

News & commentary on the USDA Crop Report and Grain Futures markets including wheat, soybeans, corn & more

USDA Crop Report is a blog dedicated to bringing updates, news and commentary on the USDA Crop Report and the grain futures markets including wheat, corn, soybeans and more.

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Options Play: Have Soybeans Topped Out?

Posted on 7/5/2015 8:20:29 AM by: Matt McKinney, Market Strategist @ Zaner. 312-277-0115.

Direct-312-277-0115, http://www.mmckinneyfutures.com/

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.

 

Options Play: Have Soybeans Topped Out?

With a pseudo doji formation on the charts and most of the fundamental news factored in have the soybeans put in a top?

 

Fundamentally, the soybeans made a correction after a rally of astronomical proportions. The August soybeans rallied on wet weather throughout the Corn Belt from a low on June 15 of $9.12/bushel to high on July 1 of $10.54/bushel. To put that in perspective, that $1.42/bushel move in 16 days would've made a trader who was long one futures contract of ZSQ5 about $7100. That is if that said trader was good enough to get in at the bottom (about $9.12/bushel) and out at the top (about $10.54/bushel).

On the current weather front, Hightower morning commentary said it best on July 2, " The dynamic of the market has not changed with wet weather across the Ohio River Valley over the next 5-7 days, although the heaviest rainfall has shifted to the south slightly which will benefit southeastern US crops. Cool temperatures remain a prominent feature in the Midwest for the 6-10 and 8-14 day models which will be favorable....". Not that I can trust any weather forecast from here to eternity. I am particularly skeptical being from Chicago, where the weathermen get paid to be wrong and the saying is, "If you don't like the weather, wait ten minutes because it will change...". That being said crops seem due for some good weather and soybeans can very resilient when all is said and done.

On the demand side, Ted Seifried the VP and Chief Marketing strategist here at Zaner Ag Hedge division, continues to harp about the lack of Chinese demand and how it could play a role in coming days and weeks. I couldn't agree more. We all know where we stand today on the supply side of Soybeans for the most part, but with no real demand from our number one customer how can prices rally from here?

 

 Technically, I have added my favorite technical indicators to this chart below. I have coined them the 10/20/50/BB Trend Finder. They are the 10 (red line), 20 (green line), and the 50 (blue line) day Simple Moving Averages or SMA's. I have also added Bollinger Bands or BB's (light blue shaded area) and Candlesticks (the red and green bars with the candle stick wicks, and on this daily chart each bar represents one day of trading). These few technical indicators can tell me many, many different characteristics about the market at a quick glance so I have them saved on my charts in MARKETHEAD, so they can populate on any chart I choose at the click of a mouse.

 

These indicators on the daily chart below tell me that August beans are in a "PRINCIPAL-TREND" up. This is the strongest form of a trend that my favorite indicators can show me. This occurs when the 10 day SMA (red line) crosses up and over the 20 day SMA (green line) as both indicators point higher and the market trades above the 10 day SMA. Now we have the 10 day SMA (red line) as the first area of support and then the 20 day SMA as the second area of support. The bottom line of the BB's (light blue shaded area) would be the final line of support on the daily chart below.

Resistance would come in at the top line of the BB's and since we are currently riding on the top line BB's I would consider this market as overbought technically. I would also consider it over bought because of how far away and how much higher it is above the 10 day SMA. Even though markets can remain overbought for long periods of time, I just don't see the fundamentals supporting that in this market right now.

The other important techcnical indicator on this chart is this pseudo doji bar on July 2 that can signal a change in trend in the near future. In fact the Wikipedia definition of a doji bar is the following- "doji is a key trend reversal indicator. This is particularly true when there is a high trading volume following an extended move in either direction. When a market has been in an uptrend and trades to a higher high than the previous three trading days, fails to hold that high, and closes in the lower 10% of that day's trading range, there is a high probability of a downtrend in the ensuing days." Finally, given the overbought condition and the fact that on July 1 the market could not close on the highs maybe the run is over. However as they say, "the trend is your friend."

I figured this out by putting my 10/20/50/BB Trend Finder on the daily chart and applying these indicators to the chart at the click of a mouse which I found at: http://www.markethead.com/2.0/free_trial.asp?ap=mmckinne , which is a web application that we have developed for our clients called MARKETHEAD where I get about 70-80% of all my research from. That means I get both technical and fundamental research from this web app and I am a veteran series 3 Broker of 15 years. So if I'm using it then maybe my readers should check it out. Yes? 

 

DAILY SOYBEAN CHART

 

 

OPTION PLAY:

For exact details on strategies, months, expiration dates, strike prices, and number of positions feel free to contact me at 312-277-0115 or mmckinney@zaner.com .

It is also important to note that I am not married to a market, but to trends. I believe that we are on the verge of lots of upcoming trends. So get in touch with me and I'll show you what could be right around the corner in terms of trending markets and how to trade them. There could be upcoming trends in the energies, indices, financials, precious metals, softs and more.

  

FREE QUOTE- "When you are good at something, you'll tell everyone. When you're great at something, they'll tell you." - Walter Payton

 

 

 

FUTURES, OPTIONS AND FOREX TRADING IS SPECULATIVE IN NATURE AND INVOLVES SUBSTANTIAL RISK OF LOSS. THESE RECOMMENDATIONS ARE A SOLICITATION FOR ENTERING INTO DERIVATIVES TRANSACTIONS. ALL KNOWN NEWS AND EVENTS HAVE ALREADY BEEN FACTORED INTO THE PRICE OF THE UNDERLYING DERIVATIVES DISCUSSED. FROM TIME TO TIME PERSONS AFFILIATED WITH ZANER, OR ITS ASSOCIATED COMPANIES, MAY HAVE POSITIONS IN RECOMMENDED AND OTHER DERIVATIVES.

 

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 UNDERDLYING 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 STICKE 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 OPTIONS PRICES MAY ONLY MOVE A LITTLE.

 

THE LIMITED RISK CHARACTERISTIC OF OPTIONS REFERS TO LONG OPTIONS ONLY AND REFERS TO THE AMOUNT OF THE LOSS, WHICH IS DEFINED AS THE PREMIUM PAID ON THE OPTION(S) PLUS FEES.

 



Where is the Chinese Soybean Demand?

Posted on 7/2/2015 1:18:12 PM by: Ted Seifried, VP, Ag Hedging @ Zaner. 312-277-0113.

In the last two weeks grain markets have been sharply higher on concerns about corn and soybean crop conditions.  In Illinois we have just seen the wettest May and June on record.  Many other areas are in the same boat (quite literally) or worse.  We have watched corn and soybean conditions drop steadily since the NASS started reporting and some serious questions have been raised about soybean planted acreage.  However, amidst the production concerns and the supply driven rally in prices there may be something the trade is overlooking for now - new crop export demand.

At this time of year the trade is usually focused on trying to guesstimate the size of the corn and soybean crops in the ground.  When we have a production concern the trade can act like it has blinders on and only pay attention to weather.  This is rightfully so and we have a term for it - a weather market.  In the case of this year we have one of the more unusual production concerns, too wet.  While I am certainly not trying to downplay the severity of the issue at hand, the market rarely has a sustainable rally based on too wet conditions.  More often than not too wet conditions abate and crop production estimates begin to rebound.

This year may be different however.  It is likely the case that there has been some irreversible damage done to both the corn and soybean crops.  This could be a very big problem for corn as the USDA was looking for a very lofty (second highest on record) national average yield and corn plantings are the lowest in five years.  Soybeans have also likely seen some loss in yield potential with the excessive rains and late planting.  However, there is a lot of soybean acreage with some more acres still getting planted.  Record demand in the last few years has the market nervous about any hiccups in production, but what if demand is cooling off a little?

New crop soybean export sales is becoming a growing concern for me.  We are currently well behind the pace of sales we have gotten used to over the past few years.  And, the biggest player - China has been noticeably absent from the new crop soybean sales sheet.  This begs the question - Why isn't China buying like they have in the last three years?  As I see it there are two possible answers.  One, China may still be convinced that prices will ultimately go lower and they are waiting to buy cheaper.  Or two, China simply does not have as many soybeans to buy this year.  Or, a combination of both.

While it is possible that China is convinced that prices will be lower after the US harvest and when the outlook for the South American crop is more clear, it is not typical of China to buy anything all at once.  China usually, or at least in the last few years,  has very large quantities to purchase and likes to scale in.  If this were the case they would likely have gotten more aggressive on new crop soybean purchases with the soybean crop concerns building in the US.  The fact that China has been completely absent from the new crop soybean sales sheet n the last two weeks is of major concern to me.

It is possible that after the double drought year in 2012 (SA drought followed by US) China had depleted the vast majority of their soybean reserve stockpile.  Since then they have likely been working to replenish those reserve stocks which could account for some of the record soybean export demand we have seen in the last three years.  However, what if China has reached it's target of rebuilding the reserve stocks and will only need to go hand to mouth this year?  If this were the case it could mean a significant reduction in Chinese demand for soybean exports this year.

Now, it is very early to be getting too concerned about soybean export demand for next year.  There is a lot of time for demand to show up.  Right now the market is focused on production, and rightfully so.  However, if and when the production concerns start to simmer down we may take a look at demand and we might not like what we see.  The bottom like is that if China and other global soybean importers really are caught up on rebuilding soybean reserves we could see a significant reduction in export demand.  This could mean export demand closer to wheat we say last year (2013/2014 marketing season).  If this were the case it could mean that the USDA is 100-220 million bushels high on the demand side of the balance sheet and could offset much or all of a drop in production.

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.  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. 

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat 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 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


Corn Market Starting to Worry about Corn Yield

Posted on 7/2/2015 12:06:44 PM by: Ted Seifried, VP, Ag Hedging @ Zaner. 312-277-0113.

For months now we have been talking about how difficult it would be this year to hit the USDA's target of 166.8 national average yield for corn.  Initially this assumption was based on statistical analysis but in the last 2 months weather has also given us reason for concern.  On top of the wet weather it also seems that with low corn prices some producers may have been a little less willing to spend the kind of money it took to grow last year's record crop.  So what does a lower yield mean for the corn market?

From a statistical point of view, we have seen corn yields fall 11-12 bushels an acre on average in years after setting a new corn yield record.  The last two examples, 2004 and 2009 were both followed up by national average yields that were about 12 bushels an acre lower in their respective follow-up years (2005,2010).  Short cuts on input cost may be an issue as well as some, certainly not all, producers may have had a hard time justifying some of the higher $ input costs.  So before we even started to plant corn this year the potential may not have been as good as last year's crop.  Then it started to rain and aside from a few brief pauses it has not stopped.  Crop conditions have fallen and planted acreage remains a question.

For corn a lower national average yield has a significant impact on production because of the fewer acres planted.  Currently we are running 3 balance sheet based on different yield estimates and slightly different demand structures.  The range of our ending stock estimates are 1.18 billion to 1.45 billion bushels.  This is with a range of yield estimates between 162 on the high end an 159 on the low end.  If yields were to fall much below 159 the corn balance sheet would get pretty tight.  Keep in mind that a 155 national average yield is slightly above the 10-year average.

The bottom line is that we could still have what should be considered a very good corn crop yet still have a tight balance sheet.  There is still a lot of time for weather to get better, but we may need to see a near perfect rest of the growing year to avoid having a tight balance sheet.  At this point most of the trade is now seeing what we have been saying for a while -  that the USDA's 166.8 national average yield estimate is likely too high, maybe much too high. 

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.  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. 

July Corn Daily chart:

July Soybeans Daily chart:

July Wheat 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 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


06/30/2015 Beans have a buy signal

Posted on 7/1/2015 1:23:12 PM by: Larry Baer, Market Strategist @ Zaner. 312-277-0112.

Call me for trade



06/30/2015 Beans have a buy signal

Posted on 7/1/2015 1:23:04 PM by: Larry Baer, Market Strategist @ Zaner. 312-277-0112.

Call me for trade



GRAIN REPORT BULLISH FOR BEANS AND CORN WHILE BEARISH FOR WHEAT BUT:

Posted on 7/1/2015 6:52:46 AM by: Rick Alexander, VP, Trading @ Zaner. 312-277-0107.

WE HAVE A VERY GOOD HEDGING DEPARTMENT HEADED BY TED SEIFRIED. WHY NOT TALK TO HIM OR ANY OF OUR OTHER HEDGING BROKERS. NO ONE WILL PRESSURE YOU AND WHAT HAVE YOU GOT TO LOSE? I'VE BEEN A LICENSED FUTURES BROKER FOR  OVER 41 YEARS AND TRUST NO ONE MORE THAN TED AND HIS GROUP.

 

 

Sharply higher closes for Minneapolis, Kansas City and Chicago wheat along with oats, corn, soybeans, soybean meal and soybean oil off the acreage and grain stocks. However, the wheat was not bullish and the estimates for the grain complex were within the ranges forecast. The one thing that helped the grains go further than they normally would have is the announcement that the there will be a resurvey in Kansas, Missouri, Texas and Arkansas which will keep us guessing on the planted area estimates longer than normal. With that being said, technically you can add the wheat complex, corn and rice to my BUY SIGNALS. I feel this is a gift to wheat farmers to add on to their hedges . I foresee the wheat complex coming  back down with the bean complex lagging behind. Naturally, weather will continue to play a part in this scenario. I feel we need to see the action for a little while in order to, hopefully, get a better handle on what lies ahead. Either way, you can't really go wrong doing some hedging if the pricing is right for you. Trying to catch tops and bottoms is more luck than anything else as far as I'm concerned. Oats are now in a good looking resistance area and need to close over three dollars for a longer term move in my opinion. Rice had a great close but also is in some resistance making we want to see a settlement over 1070 first. Corn broke through quite a lot of resistance and now needs to settle over 450 which is where our hedge department thought it could go to. I now need to see the beans  settle over 1040 based on its weekly chart not trusting them to go too much further and then eventually drop back down. Meal has led the way up recently and should eventually lead the way back down. Oil has been dragged higher lately. To repeat, I would wait probably at least a week to get a better handle of the where the grain complex is possibly headed so as not to get faked out. Of course, this plan of action is easier said than done! BUY SIGNALS FOR MINNEAPOLIS, KANSAS CITY, CHICAGO WHEAT, SOYBEANS, SOYBEAN MEAL AND SOYBEAN OIL ALONG WITH OATS, CORN AND ROUGH RICE. For additional charts, quotes, news, commentary & more, sign up for a FREE 30 -day trial to markethead.com.

 


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