US currency is appreciated against Euro. This stronger dollar cause the U.S. crops less attractive for buyer. A long with stronger currency, the crude oil price is expected to low. Analysis said that the demand has not recovered yet and storage for oil is not low. In general I think the price of commodity market tend to increase due to the following U.S. presidential elections. As well, the commodity price will respond to the USDA’s weekly crop progress report on Monday and Thursday’s weekly exports data and Friday’s updated Supply and Demand Report. For better future commodity price, I think following USDA Crop Report is important to check.

For wheat market, “World wheat crop is getting smaller by the day” according to Analyst Melbourne, he mentioned.  I expect wheat price will increase. It is similar with last week. It is due to Ukraine’s export ban policy is implemented soon on 15 NOV. The severe drought weather condition in U.S. Plains affect the supply of wheat, and Australia for New South Wales is expected rain in time of harvest which affects world supply decrease, and greater demand for wheat.

As well soybean market, I expect that the price will increase. Analytics firm Informa Economics raised its estimate of the U.S. 2012 soybean crop to 2.925 billion bushels from 2.86 billion previously. However, there is also forecast of heavy storm in Argentina. It causes the actual planning process to be 4% from 9% last year of 19.7 million hectares they plan to plant soybean. The higher yield will offset the delaying of planning corn in Argentina. So I will choose long for soybean and wheat market.

(1)    http://www.forexpros.com/news/commodities-news/grain-futures—weekly-outlook%3A-november-5—9-240264

(2)    http://www.nass.usda.gov/Publications/Reports_By_Date/2012/November_2012.asp

(3)    http://af.reuters.com/article/commoditiesNews/idAFL3E8M50IW20121105

(4)    http://www.bernama.com/bernama/v6/newsworld.php?id=706994

(5)    http://www.ibtimes.com/corn-soybeans-wheat-prices-858712

(6)    http://www.forexpros.com/news/forex-news/forex—eur-usd-weekly-outlook:-november-4—9-240269

Last week I expect the price of corn and soybean increase. First I look at the oil price.  Due to Hurricane Sandy moving toward northeaster US, it causes that Oil supply is not guaranteed for a while. Also US currency is depreciated against Euro and Yuan. Such increasing oil price and increasing demand $US lead to increasing commodity price in general.

More specifically, regarding wheat market, I chose a long position.  It was because the amount of actually supplied did not meet the expected harvest amount in Russia. As well, main region for agriculture in US has not recovered from severe drought weather. Also from Nov 15^th Ukraine implement wheat export ban. All these led to wheat price would go up I expect. I offset what I bought last week for wheat and and corn commodity on Oct 30th. I think I should have not offset it. I was afraid of whether the price kept increasing with my short position. And I made big loss of -4595.5, and the wheat price kept dropping to 868.5 until last Thursday, so my potential loss was -212.5.  , Luckily on Friday the wheat price increased to 878.50, so I gain 286.50. So I can say my prediction was right on the last day of trading.

For soybean market, I was long position too. I looked news from major soybean producer in Argentina and Brazil. They are expected good harvest, but I expect it takes time to get actual commodity into market. I made conclusion that demand would be greater than supply. My prediction was right until Thursday. The price of Soybean S2X increased to 1558.5 from 1533, and the price of soybean S3F increased to 1560 from 1535. So my potential gain was 1275 and 1250. However, the price decreased on the last day of trading. This causes loss from soybean. I think next time I offset it earlier.

http://www.forexpros.com

This website is very helpful to understand the major countries currency. This website provides explanation of four components weekly: outlook of Euro and US dollar explanation, gold, natural gas, and crude oil. These effects are crucial to anticipate the world price of grain commodity. I think the website provides much information we can elaborate in our blog. This website provides exchange rate among many countries. Such as EUR/USD, USD/JPY, USD/CAD. Also it indicates the perfect time for exchanging currency depending on different time. And like the title of website, regarding exchange rate, it provides current new in the world. Stock market news is also provided. In the section of opinion, while reading through the article, we could understand better world market with economical explanation.

http://www.albertafarmexpress.ca

This website helps to see three commodities: soybean, corn, and wheat events at once. I use information mostly from here for today’s weekly blog. It shows the change in world supply and demand. From the title, we can assume that this website shows news related to Canada. I could read agricultural news in Saskatchewan and Manitoba. And this website shows the price regarding the different type of wheat. For example, it gives price charts of regular wheat and Spring wheat.

Oil price is expected to be higher. New Jersey and Pennsylvania refiners get in trouble to operate it properly because Hurricane Sandy is moving toward Northeaster U.S(1). Thus the disturbance of supplying crude oil could underpin the increasing crude oil price, and it causes the grain price will go up. Also Euro is stronger than US currency. The exchange rate is 1.2884 on Friday, lowest since October 11(2). And Yuan is also appreciated. China’s central bank reports that it sets its daily midpoint at 6.3010 versus the dollar, the strongest midpoint level since June 20(3). The depreciated US currency would like to attract more consumers in the world. Thus increasing demand in US is expected.

For wheat, I expect that wheat price is increasing. It is because the estimated supplying wheat does not satisfy the expected amount. Russia faces on harvest time, but it is lower than expected. Russia has harvested 39.6 million tonnes of wheat by Oct. 23. Agriculture Ministry data shows that the amount is 32.5 per cent less than a previous year.  As well, the drought weather in US Plains would affect the world price of wheat. Even though many areas have been improved from light rains over last week, the main region for agriculture has not been recovered from drought. Also Ukraine’s agriculture minister announced the country would ban wheat exports from November 15. I expect hopefully wheat is increasing

For soybean, I expect the price is increasing. I focus on the weather forecasts in South America. US expects that good harvest for soybean due to drier weather beginning this weekend, but US supplies is too small to affect world price.  The big producers of soybean in Argentina and Brazil are expected to have good harvest: the drier weather in Argentina and wetter in Brazil. However, in order to get commodity there is time lag to cultivate and bring it to market, I think current supply of soybean would not provide sufficient soybean to consumers. Thus I think price would increase.

(1) http://www.reuters.com/article/2012/10/25/markets-commodities-idUSL1E8LPI9M20121025

(2)http://www.reuters.com/article/2012/10/26/us-markets-china-yuan-idUSBRE89P05E20121026

(3)http://www.forexpros.com/news/forex-news/forex—eur-usd-weekly-outlook:-october-29—november-2-239995

(4)http://www.forexpros.com/news/commodities-news/grain-futures—weekly-outlook:-october-29—november-2-239990

(5)http://www.albertafarmexpress.ca/news/cbot-wheat-corn-end-lower-soy-higher/1001799830/

What I went wrong

Last week I predicted both price of corn and wheat would be increasing. It is because the coming harvest amount was expected to be low. This could not satisfy demand in future. Thus future price was increasing I report. Also farmers sold less stock in the market. This means they were storing more because they could compensate high storage costs with high future costs. However, most days both commodity kept decreasing last week, and few days price was increasing. I could say my expectation was correct only few days. The reason for decreasing price was explained technically. Last few weeks commodity price had been increasing, so it reached the high point of cycle. So it was decreasing. I chose short position. I have short position on two corns and one wheat, and my potential gain 1312.5 wheat and 1200 corn.  For my trading balance, I offset one commodity last week, but it transmitted this week. There was time lag. I could make profits if it offset last week. I decide let my short contract in the market, and because the price will eventually will decrease.

http://www.agriculture.com/

This is website is well organized. This website explains the weather with map over the U.S. This helps to predict future contract price. This website provides daily contract price chart like CME. So it is familiar to use it. And in market analysis, the website explains the commodity market expected chagne related to economic facts.

http://www.farmandranchguide.com/

This website is one of reliable sources to gain news in the area of the Upper Midwest by providing frequently updated new.  You could search news based on categories: market, regional, crop news and livestock. And in right side of the website, it provides future price chart. And it shows weather forecast. Since weather is one of important factor to predict following crop and future contract price, the website is very helpful when it comes to knwoing the events in Midwest area.

http://www.usda.gov/oce/commodity/wasde/

It is easy to find that many reporters expect future price based on this information. It is World Agricultural Supply and Demand Estimates (WASDE) report provides expected supply and demand for not only U.S. but also global crops and livestock. In addition to literature on price, this report gives statistic data published by USDA and other government agencies.  It is released on Oct. 11, Nov. 9, Dec. 11. I think it is better idea of keeping eyes on the report, and use it when you trade.

For wheat market, the harvest time is coming in Australia (2).but it is expected to be low, so stronger demand is expected. The USDA reports support that the wheat demand of feed use is increasing from 315 million bushels of wheat from 220 million. As well, according to the agriculture ministry in Argentina, it expects its 2012-13 wheat production to be likely 11.5 million tons, down sharply from the 13.2 million ton last season (1).  Argentina, a leading global wheat exporter, is going to affect price. I expect that since future harvest is expected to be low, future price is expected to be high.  Traders would like to store more now, and they would like to sell it high price in the future. Thus I am going to long position for wheat.

For corn market, and according to USDA supply and demand report, Corn beginning stocks for 2012/13 are lowered 193 million(3). US Commodities said: “Corn is supported by the lack of farmer selling and the firmer basis levels (4).” Less stock refers to more storage.  It is caused by high future price expected. Corn demand would be more bullish. Thus I would long for corn as well.

(1)    http://www.agriculture.com/markets/analysis/corn/argentinas-cn-price-attracts-buyers_9-ar26982

(2)    http://www.farmandranchguide.com/news/markets/usda-corn-numbers-put-momentum-in-wheat/article_ab58f90e-1a14-11e2-b0ec-001a4bcf887a.html

(3)    http://www.usda.gov/oce/commodity/wasde/latest.pdf

(4)    http://www.agrimoney.com/marketreport/evening-markets-corn-soy-rise-as-seasonal-low-idea-grows–1838.html

What I went wrong

Last week, I took a break from trading. I had three short positions of corn and wheat on Oct 8^th and Oct 17^th. I expected that both wheat and corn price decreased because of decrease in demand and increase in supply. Winter crop was expected to be better in the area of the Corn Belt and the Southern Plains due to light rain. Also Russia, big supplier, decided that it is going to make easy of restriction on exporting. As well one of big consumer china was decreasing import by increasing its own production of corn. However, it turns out that both corn and wheat price increase. Even though I have one long contract having it beginning of trade, I lose money. I was long position when its price is too high. I was too scary to offset it. But I finally admit the large loss. I think I need to catch up current news what happen to grain market.

http://farmfutures.com/main.aspx

This website provides market analysis called  market commentary and afternoon recap.  It gives me tips how to analyze market. It shows main grain markets: soybean, corn, and wheat at once, so it helps to get idea what is going on in the three main markets. This website also organizes the article by day, week and month, so it is easy search articles.  As well, it provides weekly corn, soybean, and wheat review.

http://www.midwestproducer.com

Compared to other website, it gives explanation with plain words, so it is easier to understand the market. This website provides updated news in the Midwest.  In market data section, it provides price snapshot like CME, but it is not updated frequently like CME. One thing I like is that the following commentary about main commodity. It explains brief analysis about what happen to supply and demand which could not find in CME.

http://www.nass.usda.gov/Publications/Reports_By_Date/2012/October_2012.asp

I think everybody already know this website. But I think I do not introduce it in my blog, so I decide to do so. This website helps us browse NASS reports by date. The calendar is easy to follow when we market traders are allowed to read reports, so they could decide their market position. This month I think Crop production report is interesting to see.

The Road Ahead

I expect that wheat and corn price decreasing by increasing supply. Thanks to little rain in U.S., the Corn Belt and the Southern Plains have seen better winter crop.   Seasonal harvest influences future contract price decrease for wheat and corn.

Also for wheat, Russia is exporting wheat twice what they mentioned before. This allows importer to find less price conflicts of wheat.

As well, I could say price decrease is relevant to poor demand for U.S. Last week, Importers preferred to make small amount of grain contract with other exporters offering lower price of wheat instead of U.S. For example, Egypt, biggest importer, made small contract with France. I think when Crop Production report is released by USDA next week, it could be guideline for importers to decide where they could make large contract or many of small contract compared to last week. I assume This leads to price fluctuation more.

I assume that corn exported demand is decreasing because China imports less corn. From the US Grains Council reports, China produces corn 5-6 million tonnes more than in 2011. With increasing own production, it could satisfy certain domestic demand. The report also says that in order to reserve its stockpiles, China plans to import some from US.

As well, I think Corn-based ethanol affects corn price. From the Energy Information Administration report, the result of ethanol output is lowest since the agency started to record production data.  Demand from ethanol producers is decreasing, and it is related to decreasing corn prices.

Wheat demand also decrease since corn market price declines. All supports that wheat and corn price would be decreasing.

http://www.nass.usda.gov/Publications/Reports_By_Date/2012/September_2012.asp

http://in.reuters.com/article/2012/10/04/markets-grains-idINL3E8L403S20121004

http://in.reuters.com/article/2012/10/04/markets-grains-idINL3E8L403S20121004

http://www.midwestproducer.com/marketwatch/grains/morning-grains-commentary/article_1e2ddf64-0f00-11e2-a978-001a4bcf887a.html

http://farmfutures.com/story.aspx/morning-market-review-bryce-knorr-0-30780