Although past work experience involved frequent dealings with commodity futures, my current understanding of futures, and how they react to various market events is quite weak. My previous experience with futures was only to determine the final sales price (price discovery) of a particular commodity. For example, a vessel, which would transport a range from 50,000MT to 90,000MT, of No.1 Canada Western Red Spring would be sold at a per bushel rate over CME Wheat Futures. The final price was determined either before or during loading, depending on the particular contract stipulations. The basis, which would range between $1.50/bu – $2.00/bu was calculated by summing the various costs incurred during the life cycle of a trade, which would include transportation (rail, vessel & truck), documentation, terminal and infrastructure fees, labour and vessel demurrage (overtime), plus/minus a per bushel rate determined by the head office. This rate provided by the head office would reflect the company’s overall position regarding the specific commodity and would have a greater relation to the futures markets. As you can see, returns to the Vancouver trading office were not based on the performance of commodity futures but our ability to keep our costs within the predetermined basis.
I hope the above helped you understand a little more what my past work experience involved and didn’t just confuse you!
Now, onto my first experience trading futures. Using two words I would generalize my first week as bearish and conservative. Knowing I knew almost nothing I decided to limit my potential week one losses by only trading a few contracts. Currently I am short 1 Wheat and 1 Soy and long 1 Corn. My reasoning is mainly based on the latest USDA crop report which in short, confirmed better than expected harvests (http://www.agrimoney.com/marketreport/evening-markets-ags-get-caught-up-in-commodities-retreat–2308.html). This outlook has put downward pressure on Wheat, Soy and Corn, hence my decision to short Wheat, Soy and woops, I went long on corn. My position on corn has put me out $600.00, good thing it isn’t real money. I made the decision to bet against the USDA report because of some speculation regarding the USDA’s outlook on corn (http://www.agrimoney.com/news/usda-overly-optimistic-on-corn-crop-forecasts–6292.html). I am going to hold out on this position for the time being to see if the giants such as Commerzbank prove to be correct.