Well, after trading for three weeks the soybeans I decided to close my spread order (one short and one long) position on Thursday because it is expected that the price would go down due to a decrease of export expectations. USDA said, “China cancelled two cargoes of corn last week and 173,000 tonnes of soybeans previously earmarked for China were switched to Taiwan and Thailand”.

Even though, I was spread that means I was indifferent because in either price movements I could avoid losses, I was hoping to make some profits on a Short position. Thus, I ended up with this result,

Closed Contracts

Overall, the price went down after its climb because of fear that the demand for soybeans would go down because the sales did not meet the expectation. Even though the soybean futures had upward trend in the beginning of week due to a higher trade, on Friday it was closed with downward trend since it is announced by the USDA in its weekly export sales that soybean sales were expected to be at 522,200 down from the previous forecast of 650,000 to 850,000 tonnes.

the data was taken from the website “http://farmfutures.com/story.aspx?s=64403&c=0“

In the light of these events, my equity balance at the end of week was “$35661.27”

“IGC cuts grain stocks forecast to five-year low”

The International Grains Council on October 25 made changes on its estimate for the world grains stocks (maize and wheat) in 2012-2013.

In a monthly market report the IGC pointed out that the grain inventories from the major suppliers will be relatively small and the lowest for 17 years. As a result, the IGC made some cuts on its forecast of grains stocks, so it is forecasted 328 million tonnes, cutting 4 million tonnes from the previous estimation.

According to IGC the scarce availability of stocks and corresponding high prices have to rationalize the demand, leading to the shrinkage of consumption since 1998-1999.

To conclude, the IGC explains its forecast as a result of the decrease of world production of grains in main exporter countries such as Ukraine, Russia, Kazakhstan, and USA. The severe summer draught was main reason of the shrinkage of global supply that has compelled to impose restrictions on export in order to maintain a lower domestic price for the grain products (eg. Russia, Ukraine).

Briefly, this news has to do with what we have learnt in class, so an expectation of a higher price due to a lower storage can have a significant effect on prices because of arbitrage until it equals to zero or in other words to the level of storage costs.

Reference

http://www.agrimoney.com/news/top-exporters-grain-stocks-to-fall-to-17-year-low–5147.html

http://www.grainews.ca/news/igc-cuts-grain-stocks-forecast-to-five-year-low/1001797739/

Well, it is nice to be back again to the trading game. I am uploading some data for those who are trading soybeans from the website of International Grains Council at “http://www.igc.int/en/grainsupdate/igcexpprices.aspx”

Furthermore, I have found that the website at http://farmfutures.com is quite comprehensive for the collection of information, so one can follow news on price movements in the commodity markets. Usually I use this website for the trading as well as http://www.agrimoney.com/ website.

The USDA’s report on October 11, 2012 did not make a substantial difference in soybean prices.

In last week in my blog I mentioned that I was hoping the price volatility in market because of expectation of USDA’s report, so the speculators would use it to play with the market. Therefore, I kept my spread position in soybeans to avoid risk and I could do it.

On Thursday before release of the monthly crop report the soybean prices went up due to news that even though USDA was about to increase its estimate of crop production, the soybean inventories were down because of export of soybeans to China which was unusual for this time of year.

Oil World said, “US soybean exports to China were unusually large for this time of the year at roughly 2.5m tonnes in August and September but could not offset the shortfall in exports from Brazil and Argentina.” In the light of this situation, soybean prices went up, so I could make profit in long but I lost in short.

However, on Friday the market went in inverse direction after USDA’s report. Soybean production is forecasted at 2.86 billion bushels, that is a 9% rise over the September estimate, but down 8% from last year. Here are the soybean prices as of Friday October 12.

Soybeans November 2012 (CBOT)

[ Futures Prices ] [ Options ] [ Detailed Quote ] [ Technicals ]

Soybeans March 2013 (CBOT)

[ Futures Prices ] [ Options ] [ Detailed Quote ] [ Technicals ]

Briefly, my equity balance at the end of week was “$35486.77” not so much different from last week.

I think I will offset the contracts because of the price declines. However, I have to see because it is said by experts that even though USDA raised its forecast of soybean production, it also increased the volume of export. And, South America’s planting of soybeans might be delayed due to expected unpleasant weather in that part of world. Therefore, I have to keep eye on these events. Furthermore, I expect that the campaign about to label products made with GMOs in California can somehow affect the market if it is passed in November.

References:

http://farmfutures.com/story.aspx/morning-market-review-bryce-knorr-22-30780

http://www.agrimoney.com/futures.php?page=chart&sym=ZSX12

http://www.albertafarmexpress.ca/news/ad-blitz-pummels-support-for-california-gmo-labeling/1001761391/

http://farmfutures.com/story.aspx/export-sales-disappoint-64075

“Ad blitz pummels support for California GMO labeling”

Activists in California are fighting to force US food companies to tell consumers if their products are made with genetically modified organisms (GMO).

It is expected that in November this campaign against the so called GMO has to decide whether to require labels on food and drinks containing GMO and show that it is made with ingredients which are modified by scientists.

If California activists approve the requirement in November by gathering sufficient votes, it will be the first time when US food processers have to label the products that have the GMOs.

The downside of this campaign that experts say, it is less likely that producers will label their products rather they are more likely to stop using the GMOs; as result it may disrupt US food production because GMO corn, soybeans, and canola have been for decades the main ingredient of most products. Therefore, it may push the food prices up.

To conclude, I think it has to do with soybean and corn prices in futures market because it might affect the market in either way that commodity prices can rally or slump down. I expect that if California voters can pass the measurement, there will be exogenous shocks in the market.  Briefly, the crop prices might go down because of less demand caused by consumer’s side or vice versa.

References:

http://www.reuters.com/article/2012/10/11/us-california-gmo-idUSBRE89A1DA20121011

http://www.albertafarmexpress.ca/news/ad-blitz-pummels-support-for-california-gmo-labeling/1001761391/

Hello, everyone!

For this week I have come up with a few cool source of information except those I posted before.

“http://www.tkfutures.com “is a tutorial website.  The “T&K Futures and Options Inc” is quite useful for learning the basics of commodity futures and options. It has a clear explanation  of futures (hedging, margin call and so on)for beginners, especially, I like the section “links” there are references to sources that might quite useful for making strategy.  I would say it is the trading guide for learners like me.

In addition to “T&K Futures and Options Inc”, for the daily news on commodity markets I recommend www.grainews.ca .

And, www.foxbusiness.com is also for the daily news, but it is not only for the commodity futures, it is, overall, website for the striking news in USA and all around the world.

The last one is www.weather.com . In this website, you can look for the weather forecast in USA and in the world.  Also, it is impact on the expected harvest, so there is the news on weather forecast.

 “Cold Snap Could Harm Crops”

According to an agricultural meteorologist and the National Weather Service, the first snow and a cold snap may have negative effects on late –maturing corn and soybeans crops and delay the harvest.

For farmers who are harvesting soybean and corn crops in northeastern North Dakota and northwestern Minnesota, the first snowfall and a cold snap have become after a devastating summer drought.

These two regions are main largest producers of soybean and corn crops in USA.

USDA on Monday said,”54 percent of the corn crop had been harvested, up from the 20 percent five-year average, and 41 percent of the soybean crop was harvested above the 19 percent five-year average.”

However, it is expected that there will be downsides of the first cold that will slow down the harvest.  The crop regions are expecting the dropping  temperatures below normal early Sunday and Monday mornings and also, it is said that the light rains late next week will cause slowdowns in harvest of  US corn and soybean crops.

In the light of this expectation, there may be speculations in corn and soybean prices.

In addition to the weather forecast, there will be USDA’s monthly crop report on October 11.

“Decline in Canada’s canola crop impacts on oilseed markets”

On Friday, the Chicago Board of Trade November soy rose 0.3% to $15.56 a bushel because Statistics Canada said, “the canola harvest was much smaller than farmers expected and well below last year’s production, which could shift some of the demand for the oilseed to US soybeans. Canola production will be 13.36 million tons in 2012/13, down 2 million tons from the government agency’s Aug. 22 estimate of 15.4 million tons and below last year’s harvest of 14.5 million tons.”

In other words, due to the reduction of the Canola harvest volumes caused the by unpleasant weather, on Friday there was the price spikes in November soybeans. Therefore, it is expected a higher price in a soybean market because of the demand for soybeans (they are substitutes) as result of the reduction of Canola production.

References:

http://www.weather.com/news/drought/crops-cold-snap-20121005

http://en.mercopress.com/2012/10/05/decline-in-canada-s-canola-crop-impacts-on-oilseed-markets

http://www.grainews.ca/news/u-s-soybeans-rally-on-damage-to-canola-crop/1001744212/

Due to Friday’s rally after USDA’s report I decided to offset my long position (March soybeans), hoping that I would sell it at a higher price. However, On Monday, soybean futures were also pressured by profit-taking to exit bullish bets to curb risk. As a result, my loss from the closed contract was “-5163.5”.

Closed Contracts

However, I made a right decision by taking spread (one long and short positions); thus, I was neutral to the price movements. Overall, at the end of the week my total gain from spread type was “250”despite the loss in long position “-1025”.

Open Contracts

What went right from I anticipated that China made a purchase of soybeans from USA, so it could make prices up on Thursday and on Friday in the light of the reduction of Canola production in Canada, the soybeans went up, especially, Benchmark CBOT November soybean futures rose 19-3/4 cents, or 1.3 per cent, to end at $15.51-1/2 a bushel.  (for more details at “The Road Ahead”)

The USDA will release its monthly report on crop supplies and demand on October 11; it is expected that USDA will increase its expectation of the harvest, but since the cold weather in northeastern North Dakota and northwestern Minnesota (the main soybean and corn crops regions) may slow down the harvest, there might be the unexpected reductions on USDA’s forecast.  Therefore, I am anticipating the price increases after USDA’s report on October 11.

One more thing about South America’s harvest, despite fact that it is reported, “the US Department of Agriculture’s Brasilia bureau raised its forecast for the 2012-13 Brazilian soybean crop, currently being planted, by 82.0m tonnes, 1.0m tonnes above the department’s official forecast, citing the boost to yields from extra fertilizer applications.”, port congestion and logistical issues are making constraints to fertilizer imports.

“These logistical problems could result in a slower planting pace of the 2012-13 soybean crop than what was originally anticipated.”, said the USDA bureau.  In other words, it has to do with soybean harvests in South America that might cause the shortage of the world supply of soybeans due to transportation issues and its high costs.

Since, the market is very volatile I will hold my spread position to avoid the risk, and continue to follow news on commodity market. (Especially, I want to figure out issues with genetically modified soybeans why Russia and Europe have initiated to ban its import that might have a huge impact on a soybean market).

References:

http://en.mercopress.com/2012/10/05/decline-in-canada-s-canola-crop-impacts-on-oilseed-markets

http://www.weather.com/news/drought/crops-cold-snap-20121005

http://www.agriculture.com/markets/analysis/soybeans/soybe-futures-shed-friday-gains_10-ar26653

http://www.grainews.ca/news/u-s-soybeans-rally-on-damage-to-canola-crop/1001744212/