funtime

In the coming week, the main strategy is ” hedging”, which means i will share risks between 2 commodities: corn and soybean.

In my judgement, corn is most likely to drop in price for several days[i], because of the coming harvest in USA. Though, in the growing season matter how much the harvest is, it will for certain increase supply in the market and drag the price downwards. Besides, when you search on the Bloomberg with “corn”, the news titles were all harvest new in around world: china especially, as well as French. Though the price has declined in some degree, it is still on a historical high price, according to mundi index 10 years data[ii].

In a short run, on oct. 11, report on corn and soybean size will be released; it will be major supply information[iii]. So now we can in advance make a forecast, be ready ahead.

In the consumption, the exportation of corn has been accelerated in September. However it is still under the expectation of US government, also the ethanol consumption is still under last year’s level. Since it is only several percent below last year, and I believe market has reacted to that, I conclude that though the exportation will larger in October but has no many effects on price.

Beside corn, I plan to hedge the corn with soybean. Soybean’s production has been stable recently. But what’s wired is that China has purchased large amount of soybean. This confirmed my previous research results: Chinese government has released news that China’s has a sufficient soybean stock which is meant to suppress soybean price and also cover the truth that stock level is far below normal.   Hence it will be highly likely soybean price will rise in several days.  In another dimension, soybean price is somehow unreasonable unstable with large fluctuation. In this sense, it is suit for hedge purpose.

In conclusion, I will go long in soybean and at the same time speculate corn go short in the coming days.

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