First of all, I want to say thank you very much for my classmates who commented on my blog last week!:) The comments really inspired me for further developing my interests of analysis although my profits turn out to be negative this week (aii…>”<)~ I think I am very sure what I want to learn from this course now.

Also, from the experience on last Friday and Oct 6, I think reading news could not really help us to estimate the price. It could only help us to develop our sense of how the factors may affect prices and enhance our skills of analysis. So guys, if you are still upset by the negative or closed to negative profits, let us forget about the profits and focus on developing our skills to an expert of analysis. It could have more fun by doing it!!!

 

 Oct 3, 2011

Since there are limited news provided online during the weekend, it is hard to estimate whether the price will trend up or down tomorrow. Although I lost large amount of money at the end of the last week, I still want to get more information before offsetting my contracts, so I did not bid today.

Corn (did not bid): (-1)*(592.4-592.4)*50=0

Soybean (did not bid): (-2)*(1179-1177.4)*50=-160

Wheat (did not bid): (-3)*(609.2-619.4)*50=1530

Margin Balance: 3650-160+1530=5020

 

 Oct 4, 2011

-Brazil increases its inflation: increases its commodity prices. As the second last export country of soybean, people will import less from Brazil and will import from U.S instead since the price in the U.S now are relatively lower. People imports more from the U.S, so the domestic supply of soybean in the U.S decreases. Price of soybean in U.S goes up.

-India promises to buy wheat from farmers in a raising price of 15% (India is the second largest exporter of wheat): the farmers will be attracted by India’s wheat price, so that the farmers in the U.S will start selling to the India. The supply of wheat in the U.S will decrease domestically, the price of wheat in the U.S will increase.

I actually wanted to try one more time to use my analysis to estimate the price trend tomorrow. If it does not work, I will continue to do the analysis each day about the news since analysis is more than anything that I want to learn from this course. However, for bidding, I think looking at the price trend in the cmegroup.com and Daily commodity futures price charts could estimate more correctly about the price trends.

Corn (1 short contract, offset): (1)*(592.4-592.4)*50=0

Soybean (did not bid): (-2)*(1177.4-1160)*50=-1740

Wheat (did not bid): (-3)*(619.4-604)*50=-2310

Margin Balance: 5020-1740-2310=970

 

 Oct 5, 2011 (the news are from Oct 4, 2011)

Obviously, the bidding strategy that I used yesterday was not correct since they were not the major factors that affected prices.

And I think the dominant factors affected prices today were the recession of economic globally and the amount of harvest in the U.S. Since the economic slumps recently, the import demand of corn, wheat and soybean from the U.S might decrease. If the U.S could not be able to export their products out, the domestic supply of corn, wheat and soybean might increase (the supply curve will shift to the right) which causes the price of these products to decrease. Since the amount of harvest in corn and soybean are more than what the USDA expected, the supply domestically in the U.S will increase which cause the price to decrease.

Also we have to take a look at the USDA report on Oct 12 since it will make adjustment about report.

Reference: http://www.bloomberg.com/news/2011-10-04/soybeans-corn-wheat-slide-as-economic-slump-may-reduce-exports-from-u-s-.html

Other factors:

-Morgan Stanley is going to invest $7.5 billion in the farms to grow corn, wheat and soybean in Ukraine: price of U.S goes down.

-China continuously imports corns from the U.S: minor factor, although it will cause the price of corn to increase, the factor could not affect the prices as other factors do.

-Warm and dry weather good for the production of corn, soybean and wheat: price decreases

-U.S dollars continuously to be appreciated: increase price, however, according to the news on Bloomberg.com, this could not dominate the prices.

Corn (1 short contract): (1)*(585-605.4)*50=-1020

Soybean (3 short contracts, offset 2 long contracts and take 1 short position):

(2)*(1160-1160)*50=0

(1)*(1160-1163.6)*50=-180

Wheat (4 short contracts, offset 3 long contracts and take 1 short position):

(3)*(604-604)*50=0

(1)*(604-625.2)*50=-1060

Margin Balance: 970-1020-180-1060=-1290

 

Oct 6, 2011

According to my analysis yesterday, the price should go down. However, the price becomes unpredictable again since the prices of corn, soybean and wheat all go up today!

So let the analysis comes out to my mind and to see what is happening:

Since the U.S reported more hog and cattle, and the price of corn, wheat and soybean are very low relatively, the costs of feeding these livestock decreases, so the farmers will demand more of these commodities. Thus, the demand of corn, wheat and soybean will increase which cause the price to increase.

I think this is the major factor that causes the price to rise today since the farmers could generate profits from purchasing more corn, soybean and wheat to feed livestock at a low price.

Although they happened, I still want to observe what will happen in the next few days to see whether I should offset my contracts and take long position. Since I think this is only a factor that could affect the price in one or two days and could not make great effects on prices. So I did not do anything today.

Corn (did not bid): (1)*(605.4-605.4)*50=0

Soybean (did not bid): (1)*(1163.6-1163.6)*50=0

Wheat (did not bid): (1)*(625.2-616)*50=460

Margin Balance: -1290+460=-830

 

Oct 7, 2011

Actually I have already found out that the Technical Analysis tools (by looking at the indexes) that I learned from every week’s group discussion are very helpful for estimating prices. However, sometimes the index is very confusing, such as RSI since there could be more oversold when it has already been oversold. From discussion with Lixi and Tasha, I found out that the index of MACD is a very good index of price changes, so I want to take a look at MACD to see what the price trend is.

Corn: the fast moving average (12-week) crosses below the slow moving average from (26-week) from the very beginning of September, and it never crosses above it until now. However, I could see that the spread between fast moving average and slow moving average is getting closer during this week.

Soybean: the MACD trend of soybean is very similar to corn. However, the price spread between the slow moving average and fast moving average is still holding the same.

Wheat: the fast moving average (12-week) crosses below the slow moving average from (26-week) from the very beginning of September, and the price spread between these two moving averages are getting closer and closer, that means the fast moving average might cross above the slow moving average very soon.

However, the news indicates that the production of soybean in South America (Brazil and Argentina) is decreasing which might cause the price increasing in the U.S. I think it might cause the price of soybean to increase by a little bit tomorrow, but it will be affected by other factors very soon later, just like last week, so I do not want to do anything today and just want to observe for few more days.