This week my strategies were not that clear, so it resulted in the loss of 4,000. Finally, my net balance is 20,900, losing almost 5,000.

First bid on 15^th November, Tuesday

Two short contracts for corn at 647 and two long for wheat at 629.6

For corn

From the view of RSI, the fast moving average is below slow moving average, which means the corn market is bearish. In addition, the fast MACD just crossed the slow MACD, which is a strong signal of the bearish corn market.

For wheat

European Union wheat stocks are to remain “tight” despite a better harvest and it would increase imports from the Black Sea, as rising use by livestock farms and ethanol plants mops up much of the extra supplies.

Second bid on 16^th November, Wednesday

One short contract for corn(failed) and three long contracts for wheat

For Corn

Due to weakening of the US dollar, we can expect that demand for US exports will rise, but this effect will be offset by the larger worldwide supply of corn and feed competition; therefore, the corn price would be still a downward trend.

For wheat

Consumers on Taiwan, like others around the world, are becoming more health-conscious and aware of the nutritional value of whole- and multi-grain products. As U.S. Wheat Associates (USW) recognized this as an opportunity to increase markets for U.S. wheat, the organizations have partnered with the Taipei office of USDA’s Foreign Agricultural Service to promote healthy baked goods in Taiwan. Therefore, huge hunger for US wheat would make the wheat price positively.

Third bid on 17^th November, Thursday

Take two long contracts for corn and five short contracts for wheat

The reason was just offsetting all of my contracts. For corn, the main reason is tight stocks and strong demand of US corn. The U.S. will need every bushel of corn produced this year to meet the need for food and fuel and to rebuild supplies to a more comfortable level.

In the end, I can’t believe that the trading game would be over this week. Even though it took more than 10 weeks, I still felt time was going so fast. Based on this game, I Learnt how the futures market work and experienced a wonderful course on trading as well. Thanks Prof. Jim for giving us the opportunity to learn about the futures market, as well as Andrew and Javier.

This week there seems like to be quite less information before USDA’s report this Wednesday. However, the UN’s Food and Agriculture Organization has warned that
agricultural commodities prices are expected to remain at high levels well into 2012, as well as prices would continue to be extremely volatile.

First bid on Tuesday, 8^th November

Take three long contracts for corn, one short contract for soybeans and wheat respectively

For corn

Recently, Smithfield Foods Inc. (SFD), the nation’s largest pork processor, said their hog production would increase considerably because of very strong export demand. As a main hog’ feed, plenty of corn will be needed to meet their demands for higher hog production, which would potentially drive the corn price up. Also, China will become the world’s top importer of agricultural products such as corn used mainly in animal feed within recent years due to limited arable land and “relatively weak” agricultural technologies, and it will affect the corn price positively.

For soybeans

According to Wednesday’s supply-and-demand report from the U.S. Department of Agriculture, the U.S. export demand for soybeans are weak, so it implies that the price of soybeans will be bearish before USDA will issue the new report this Wednesday.

For wheat

In Kazakhstan and Russia high wheat harvests has led to a shortage of storage space and increase in export transportation costs such that they exceed wheat prices. This should push down the price of Black Sea wheat and have a bearish effect on US wheat prices.

Second bid on Thursday, 10^th November (not bad)

Take three long contracts for corn and soybeans respectively

For corn

On Wednesday the USDA reported that The 2011 U.S. corn crop was now forecast at 12.31 billion bushels, 123 million smaller than the October forecast and 137 million smaller than the 2010 crop, because yield forecasts declined substantially for Minnesota, the Dakotas and Texas. Also, the national average yield is forecast at 146.7 bushels, 1.4 bushels lower than the October forecast. These reasons would cause the corn price to go up for sure.

For soybeans

Almost same reason as I did for corn. The 2011 U.S. soybean crop is now forecast at 3.046 billion bushels, 14 million less than the October forecast and 293 million bushels smaller than the 2010 crop. The U.S. average yield is forecast at 41.3 bushels, 0.2 bushel below the October forecast and 2.2 bushels below the 2010 average. Even though the soybeans crop was just slightly less than the October forecast comparing to corn crop, I still insisted that the soybeans price would go up in the following few days.

Overall, the grain prices are still fluctuating this week, which is still hard to control. But we just have one week left to play the trading game, hope everyone will be going well and make the end better…

This week the prices of commodities were quite fluctuating for several days. However, my strategies seemed to be not that clear since more than half of bids were failed. I have no idea what reasons were, but as for the strategies, I have to analyze them where the problems were from this weekend.

First bid on 1st Nov, Monday

One short contract for corn, soybeans and wheat respectively

There were several reasons that I predicted all three commodities’ price would be a downward trend. First, bigger crops in Ukraine and the European Union are increasing competition for U.S. grain in export markets. Second the US dollar will spike because of Japanese intervention in currency exchange market by buying US dollars, so, to a great extent, the prices of three commodities would decrease. Also, Ukraine had harvested 68 percent of its planted corn last week, reaping 14.1 million metric tons, more than all of last year’s harvest, so the excess supply should also drive the corn price down. However, just the soybeans price went down from 1207.4 to 1192.2, in turn, the corn price rose from 647 to 654.2 with relatively stable wheat price.

Second bid on 2^nd Nov, Tuesday

Two long contract for corn (not enter to the market)

The reason why I was going long was due to the strong demand from China.

Third bid on 3^rd Nov, Wednesday

One short contract for both soybeans and wheat

For soybeans

I thought the strong US dollar would be still the big factor affecting the soybeans price since soybeans futures were down for several days because of continuously Japanese intervention. It means that stronger US dollar will reduce the appeal of US crops to overseas buyers and make commodities less attractive as an alternative investment; therefore, the grain futures were still bearish.

For wheat

Since the market of wheat was pressured by the forecasts of crop-friendly weather for the US hard red winter wheat area, the potential increased production would drive the wheat price down.

This week it seems to be depressing as losing a lot of money. Hopefully, based on organizing my strategies well, I could make a good performance on the game.

It is a huge relief that we have finished the mid-term, good luck guys! Enjoy this weekend…

Getting to my point, after having a week rest and reviewing of FRE501’ mid-term, I could clearly understand the arbitrage, hedge, basis, price spread and so on, to some extent, which could give me ideas for improving the strategies of trading game. Based on the knowledge, it seems like that I have been more confident to the game, but indeed it did not go well.

First bid on 25^th October, Tuesday

Long 1 contract for corn and wheat at 647.5 and 635.2 respectively, short 2 contracts for soybeans at 1232

Calculation

The loss from corn is (647.5-637.5)(-1)*50=-515 and wheat is (635.2-619.4)*(-1)*50=     -790. The gain from soybeans is (1210.4-1232)*2*50=2160. So the net balance increases -515-790+2160=855, but from previous week it remains two long contracts which was trying to offset but fail. It is (1225.4-1210.4)*(-2)*50=-1500, therefore the net balance should finally gain -1500+855=-645. The net balance on 26^th would be 21345-645=20700.

Strategies

Chinese demand for corn is far higher than the 182m tons being revealed by official US data, which signaled that the corn price would go up because of huge import demand for corn in China. In the meantime, since the fast moving average is above the slow moving average (from the technical analysis), I predicted the price trend of wheat is upward. As for the soybeans, I wanted to offset the contracts totally. On the other hand, the fast moving average is below the slow moving average thus it should be in bearish
territory.

Second bid on 27^th October, Wednesday

Short contract for corn at 647

Calculation

The profits from corn is (637.2-651.4)*(-1)*50 + (647-651.4)*2*50=270, and from wheat is (619.4-644)*(-1)*50=1230, so the net balance on 27^th will be 1500(1230+270) +20700=22200.

Strategies

Before the bid, I found one piece of information on 26^th, October that is China had released 3.7 million tons of corn from the government reserves into the market. It means that China will reduce the import from US, so I predicted that the corn price
would decrease. However, the price went up even a big jump, which made me a big
loss.  The reason after that I checked is the reduced concern demand became weaken after European leaders agreed on a plan to curb the region’s debt crisis.

This week the lesson from the loss for corn on 27th is that improving the ability of collecting information should be more critical for me. Otherwise the loss like that will still happen. Anyway, Halloween is coming… hope everyone has fun…

Lots of tasks this week made me much exhausted, what’ worse, I got a big loss on Monday…

However, based on my strategies, I gained the money back from 15,125 to 25,920.

First bid on 12 (gain 7,450)

Two long contracts for corn at 629.7

Five Long contracts for soybeans at 1230.6

My decision was that I went long for corn and soybeans even though I missed the big jump in futures prices on Monday, because the market expects China to buy corn this week to take advantage of a steep decline in global prices, which will potentially increase the corn price because of the following tightened supply. Also Russia had decreased their corn exports in order to keep inventories on their domestic market, which still made the corn futures bullish.

There were two reasons for taking five long contracts for soybeans. Firstly, I wanted to offset my soybeans contracts (maybe not insightful). Secondly, as China increased purchases of soybeans and soybeans oil after global prices slumped, it will probably rise the soybeans price.

Second bid on 13 (gain 3,345)

Short for corn at 640.7, long for soybeans at 1250.3 and short for wheat at 621.7

I took five short contracts for corn just because I wanted to offset my contracts and be ready to go short. The reason was that the U.S. government boosted its estimates for global stockpiles, signaling increased supplies for makers of food, animal feed and ethanol which will drive the corn price down in the following few days. Because of this, I also took two short contracts for wheat.

Furthermore, I went long for soybeans because the report from the National Oilseed Processors Association showed soybean oil stocks of 1.950 billion pounds down from 2.313 billion which indicated an increase in soybean oil demand; therefore the soybeans price would go up.

In sum, I am quite satisfied that the big loss on Monday has been offset by two bids mentioned above. Hopefully, next week it will be going better…

Last week, I offset all of my contracts with 26,080 of net balance. I am happy for even getting the result because in the previous weeks I was still confused a little bit about the trading game.

This week, however, after taking the lecture of commodity fufures Professor Jim Vercammen demonstrated, I almost understand how futures market functions such as  what the relationship between spot price and future price is, how to use an arbitrage, and how convenience yield works, which are really helpful for my understanding of trading game.

Overall, the market would be still bearish this week. The main reason is that US dollar continues to appreciate, so the imports price from the United States would become more expensive and demand would derease which drive down the expected prices of commodities. However, the information that China would increase the demand from the United State could rise the corn price.

This week I took two bids on Tuesday and Friday respectively…

On 4th Oct., I went short for 3 units soybeans at 1161 and 2 units wheat at 601 respectively.

profits1 =3*50*(1161-1158.2)+2*50*(601-607.4)=-220

For soybeans, besides the appreciation of US dollar, based on technical analysis, the fast moving average is still below the slow moving average, so the soybeans price is still a downward trend. In addition, even though RSI is 17.44 which is obviously oversold, actually, fears dominated the market so that people tend to be irrational at present. Therefore, I keep going short for soybeans.

For wheat, there were two reasons why I went short for wheat. First, a government report showed U.S. supplies of wheat were larger than anticipated, so excess supply would decrease the wheat price. Second, according to the indication of MACD, the fast moving average still crosses below the slow moving average never above the slow one from the very beginning of September, so the wheat market is still bearish.

On 7th Oct., go long for 3 units corn and go short for 2 units soybeans(but not enter to the market)

profits2 =(-3)*50*(603.9-600.0)=-585

Obviously, for corn, the reason why I would remain very bullish on corn is just the large corn demand of China importing from the U.S..

For soybeans, the reason why I went short is the weather conditions. Dry and warm weather was forecast across the Midwest and the Delta regions for several days, which would be likely to help crop development and advance the harvest. Therefore, the expected soybeans price would become lower.

Net balance= previous week net balance + this week profits=26,080+(-220-585)=25,275

Lastly, I will keep bullish on corn in the next week, because the market expects China to buy corn after returning from its annual week-long national holiday on 9th October to take advantage of a steep decline in global corn prices, even though there was a small decrease on corn price.

The prices are quite fluctuating this week…

This week there were two main tasks I planned. The first task is to offset the contracts basing on the predictions of our “demand and global outlook” group, because I want to make my profits and strategies sense and reenter market. The second one is to learn other strategies besides ours such as that of “technical analysis” and “exchange rate” groups, which I am planning to combine those strategies in the following weeks. Finally, I successfully offset my contracts on Wednesday with two bids, but I almost lost almost $10,000 mainly from the wheat board.

Corn

The price of corn is likely to drop because of following the possible fall in the global oil price. Moreover, since in the United States there are specific mandates of an ethanol ratio in gasoline, bearish- Mandates of oil remain, but potential loss of blenders (mixers of gasoline) credit in December, imply that ethanol production will decline. Based on the linkage of Ethanol and the price of corn, corn prices will fall.

Soybeans

Thailand and Indonesia have strong demands for soybeans from US rise by at least 13% to a multi-year high of 3 million metric tons in 2011-12 marketing year. Therefore
the rises of exports of US soybeans to South East Asia predict the soybeans price will increase.

Wheat

As Part of China’s 12th 5 Year Plan, it announced its focus the animal husbandry sector, revealing its desire to be more demand for wheat in this industry, which, to
some extent, will push up the prices of wheat. Even though other groups predict
the wheat price will decrease, I still go long for it to offset that contract this week.

During the previous weeks I got much confusion on trading game. That’s the reason I want to offset my contracts and enter futures market next week with brand-new strategies.

There were two bids this week(in order to offset all of my contracts)

First bid on 27 Sept:             corn(2) at 648.9

Second bid on 28 Sept:       soybeans(-2) at 1269.9          wheat(-3) at 699.9

Previous contracts:               corn(-2)       soybeans(2)       wheat(3)

profit(corn)=(-2)*50*(638.4-648)+(-2)*50*(648-652.2)+2*50*(648.9-652.2)=1050

profit(soybeans)=2*50*(1258-1223.4)+(-2)*50*(1269.9-1223.4)=-1190

profit(wheat)=3*50*(640.6-638.6)+(-3)*50*(699.9-638.6)=-8895

total profits=1050-1190-8895=-9035

net balance=35115(previous week net balance)-9035=26080

Wow, Trading Game is amazing…

It is quite a relief that I have got more understanding about the Trading Game this week. To some degree, I can earn money with my personal strategies, even though I got much loss on corn. As to how to get the success, that is most based on the assists of my mates and the lectures professor Jim demonstrated. I really appreciate for that.

Corn

During this week, Japan, the world’s largest importer, have bought 0.8 million metric tons of feed-grade corn for the shipment of October to December. In additional to importing 15 cargoes of corn (each of 55,000 tons) to South Korea for December-to-January arrival and importing 100,000 metric tons of corn to ONAB (Algeria’s animal feed agency) by the end of October, there are much more excess on the demands of corn. Therefore, I predicted the price of corn would go up, but actually it went inverse.

Soybeans

Even though
Chinese imports have increased, China is still meeting its demands for soybeans from Argentina rather than switching to the US like historical trends. In addition to the European debt crisis indicated that US soybean prices would fall, I thought the price of soybeans would decrease.

Wheat

Egypt, the world’s largest importer of wheat, bought  420,000 MT wheat from Russia. Moreover, Kazakhstan is planning to export over 10 million tons of grain. Also, India is going to lift its export ban. I predicted that US wheat price would go down because demand is being met outside.

These are what I learnt this week and the strategies I used. Hopefully, more money would come to my pocket…

There were two bids this week:

First bid  on 20 Sept:     corn (-2) at 696.3,  soybeans (1) at 1348.1,   wheat (1) at 681.9,

Second bid on 21 Sept:              corn (2) at 686.9

previous week contract is           corn(-2),    soybeans(1),    wheat (2)

Profits(corn)=(-2)*50*(692-690.2)+(-2)*50*(696.3-690.2)+(-4)*50*(690.2-685.6)+2*50*(686.9-685.6)+(-2)*50*(685.6-638.4)=-6300

profit(soybeans)=1*50*(1355.4-1338)+1*50*(1348.1-1338)+2*50*(1338-1258)=9375

profits(wheat)=2*50*(688.2-673)+2*50*(673-674.6)+1*50*(681.9-674.6)+3*50*(674.6-640.6)=6825

total profits=-6300+9375+6825=9900

net balance=25215(previous week net balance)+9900=35115

To be frank, this is my first time to handle Commodity Futures. At the beginning of this week, it was really confused to me, even though I have read all the materials on Vista. However, after doing more researches and sharing information with others, it seems to be going better.

From being totally confused to understanding how to earn and calculate the profits, I am starting to be interested in this game, although there are still more challenges I will have to face in the following weeks.

Based on the blogs five expert groups posted and researches I did, I utilized the following basic strategies on corn, soybeans and wheat futures respectively.

Corn

With the hot and dry summer in the US Mideast, it will lead to a decrease in corn yield which will result in global supply to decline. Furthermore, according to the global standard for corn, U.S corn stocks-to-use ratio is going down from 5.4% to 5.3%
last month which will lead to a strong price increase. Considering two points
above, I predicted that corn price would go up.

Soybeans

USDA
reported a cancellation on Friday of 240,000 tonnes in 2011/12 marketing year
US soybean sales to China on 9^th Sep. Furthermore, because of plenty rainfall in US, the production of soybeans will experience a considerable increase in the U.S (the world’s largest exporter of the grains). With such larger supplies, soybean prices will be definitely expecting a downward trend.

Wheat

Chinese feed mills are expected to consume 17 million metric tons of wheat to produce animal feeds compare with around 12.5 million tons last year, as wheat prices become more attractive compared to corn. In addition, demand for wheat as animal feed will continue to rise if corn prices still remain high, since they are highly substitution of consumption. Based on considerable consumption of wheat, I predicted that there would be a downward trend on wheat price.

At last, from my points of view, those strategies are pretty easy to understand, since I have not been so insightful for this game. However, based on the strategies I used, I made some profits in total.  Hopefully, I could be able to figure it out much better next week…

First bid on 15, Sept:

long for corn (-2) at 719.7

short for soybeans (1) at 1385.7

short for wheat (2) at 702.9

The profits of this week:

Corn: (-2)*50*(719.7-692)=-2770,     Soybeans: 1*50*(1385.7-1355.4)=1515,

Wheat: 2*50*(702.9-688.2)=1470

profits=-2770+1515+1470=215  Net balance=215+25000=25215