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/

“US farmers received a warning over the threat of dryness to 2013 crops…”

Well, it seems that United States Department of Agriculture’s (USDA) Friday report shocked traders resulting price jumps in commodity market.

Even though a late rain in Midwest had helped to improve the harvest of grains, especially, the later planted soybeans, farmers of USA have received the warning that the hazardous drought which has destroyed well over 50 percent of the yields can have negative consequences even in next year.

According to crop weather expert Gail Martell at Martell Crop Projections, this year’s dry weather conditions may have negative impacts on 2013 crops too.  It is said that the severe drought has caused weakening soil moisture deficits of six–to-nine inches due to the shortage of water over the past three months. It is announced that North-central US is significantly waterless in key corn states Iowa, Nebraska and Minnesota. Also, nearby lands for farming usage is excessively dry in northern Illinois, Wisconsin, Missouri, and eastern parts of South and North Dakota. It is also pointed out that if to put these circumstances into perspective, Iowa will need well over 50 percent of normal rainfall in Fall (October-November)  and Spring (until April) to vanish repercussions of the severe drought; as a result to revive the moisture of soil for season 2013.

From my estimation, this forecast has to do with storage which we learnt last week. If it, indeed, is reliable information, it pushes cash prices up because buyers will want to store the crop to sell in future because of a high price expectation, but it will last until arbitrage equals to zero. So, due to this warning, I am expecting that the corn and soybean prices will drive up more.

References:

http://www.agrimoney.com/news/dryness-helps-us-harvest-but-a-risk-to-2013-crops–5026.html

In last week I was thinking that I would trade a short sell wheat contract in addition to one long (buy) March contract because of expectation of Russia’s constraint of export of wheat; however, I ended up with trading only soybeans. The reason for that is I wanted to learn more about soybean market and soybean as a commodity overall.

Open Contracts

However, I made mistake on not offsetting my long March contract.

What went right that I made spread on soybeans this week in Thursday because of its less riskiness. Putting spread on long position the gain was “1535” but the loss on short position was “-1200”. The equity balance was “$36911.78” at the end of this week in total; the gain and loss was “-3087.5”.

Overall, in this week the prices for soybean were down, except it was up in Tuesday because of chatter that China would buy soybeans that would increase demand; however, it is recovered from its early losses because the USDA announced a sale of 180 tmt of U.S. soybean to China for the 2012/2013 marketing year, Thursday China bought 110 tmt of U.S. soybeans. Furthermore, in light of the positive atmosphere in corn and wheat trading, soybeans are closed at a higher price.

In spite of a high close, according to USDA’s report, the soybeans forecast way better that it was in previous forecast that means it may continue its down pattern.

In last week I was hoping that China would increase its demand for soybeans that happened in this week. And, I am hoping for South America’s harvest that it may affect to soybean prices. Also, putting spread I will avoid risk, and in light of high prices after USDA’s report I want to offset my long position in market type.

References:

http://farmfutures.com/story.aspx/afternoon-recap-tom-leffler-0-30795

http://in.reuters.com/article/2012/09/25/markets-grains-idINL4E8KP4JC20120925

http://www.agrimoney.com/news/dryness-helps-us-harvest-but-a-risk-to-2013-crops–5026.html

Dear classmates,

Well, the second week of trading game is finished.

This week was more interesting for me because I think I have started understanding more the details of the future market.  So again there are a lot of information and new sources, I tried to pick only the interesting ones.

For this week check out please a website “Trading Charts” at http://futures.tradingcharts.com

I have found this website quite useful for technical and fundamental analyses. It has news on commodity markets, charts, and tables. Also, the website provides some tutorial on explanation of trading features.  For instances, there are explanations of hedging, price spreads, basis, and others. In addition, I found some advices on technical analysis how to understand charts and so on.

For some of you who are interested in understanding commodity future convergences there is a pdf file by CME group that explains some issues of convergences of contracts when they near to expiration dates. If you wish, it is available at  “http://www.cmegroup.com/trading/agricultural/files/AC422_WheatResearchPaper_FINAL_SR”

Hope, you will find these sources useful and interesting.