According to last week’s experience I make two decision:

1. Go on with the long contract of soybeans.  On 28^th September, I bought  5 contracts of  soybeans (Nov 2012).

The first reason I do this is that the newest USDA report, which corrects the former output data of soybeans in America this year, says the actual statistic of this year’s supply of soybeans is lower than expected. I believe such news will shock the soybeans market for a few days.

The second reason is that in terms of the historical data, from September to October, the soybeans market fluctuates wildly. In the long run, after several rise and fall, the price will tend to be stable; while in the short run, we must analysis the psychology of both traders and farmers. As to the farmers, last week’s “big harvest” news decreased the price sharply.  From that, I guess more farmers will wait to see the price rally up which means the supply will reduce again. So I think the price of the Nov. soybeans price will rise in the short term.

2. Last week we learned how to use the spreads of two periods’ contract to make arbitrage. So this week I also want to have a try on the spreads order.

Week 2: 1. What went wrong

Last Friday I made a long contract on the soybeans, expecting the imbalance of the demand and supply will lead a long rising of the soybean’s price. However, the USDA’s report posted on that day saying the expecting output is underestimated lead a big diving at the opening order on Monday.

I planned to sell the contract on Monday, but I was really unwilling to make such a huge lost. In consideration of the common sense (big drought will impact the output of crop ) and abundant research on the producing area’s  real situation, I believe the reduction of production will happen in the coming days. So I choose to wait. However, several days have passed and the bear market had no sign to rally up. I started to doubt my judgement and made an offset with a 401.00 lost on 27^th September.

As might have been expected, on 28^th Sept. the USDA posted a report to correct the anterior output data——the supply of the soybeans is in a large shortage!!! God, then the soybeans market reversed immediately. Unfortunately, I have already sold the long contract….

In this week, I had two lessons:

1. Be patient! Trust your judgement. As Andrew told us on the first lab class, despite the skills in the game, the consistent process and strong inner mind are very important. There are too many information around us, and most of them are posted for commercial speculation. We should learn how to select the efficient part for ourselves.

2. Don’t just keep eyes on the fundamental plane, the historical data is also a key to the success. If I studied the relationship of the price trend and the report dates earlier, I would not hesitate for such a long time to sell the contract.  After analysing the last year data, I find the correlation between the price’s variation and date of report is really high. And the impact often lasts for a period (at least for 3days).

All in all,  what happened this week really let me realize that “Trading is an art form!” So,  cheer up, let’s make the game more interesting!

Reference:

http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1046

Hi everyone,

This week, I focused on searching for the data resources. Here are some useful link to share with you.

1. http://www.indexmundi.com/

This website has abundant information of the index data. It is classified by countries, commodities, country facts and so on. If you want to search for the data related to the agribusiness area, you just need to type the name of the commodity into the blank at the top right corner of the website.

2. http://futures.tradingcharts.com/

This website contains much information of different commodities price data in the trade market. The clear form and diagram will help you a lot in the game.

3. Additionally, the latest news posted on “Reuters” and “Bloomberg” is also very helpful for the fundamental analysis.

Hope the best luck to you all!

I predicted the price of the soybean will keep rising in the next week. U.S. soybean futures leapt to a record, buoyed by strong demand and concerns that global supplies will remain tight well into next year.

“On Thursday, the U.S. Department of Agriculture said weekly export sales of soybeans totaled 721,300 metric tons, which was at the high end of traders’ expectations, showing that demand for U.S. soybeans hasn’t waned as prices have hit highs.

Such reports, combined with supply squeezed by drought, have made for an explosive market.

‘It’s like watching kindling, and the smallest spark sets it on fire,’ said Sterling Smith, commodity strategist with Citigroup Inc. in Chicago.

The USDA earlier this month projected the U.S. soybean crop will produce 2.692 billion bushels this year, down 12% from last year, due to the worst drought in decades.

Heavy rains from the remnants of Hurricane Isaac are expected to hit the Midwest in the coming days, but because much of the nation’s soybean crop has reached maturity, the rain will be too late to help, meteorologists said Thursday.”(2010-9-25 http://online.wsj.com/article/SB10000872396390444772804577621670354919962.html )

Soybean futures could approach $20 a bushel later this year, said Doug Bergman, vice president and trader with RCM Asset Management in Chicago: “We’ve got too much demand and too little production.”

Reference：

http://online.wsj.com/article/SB10000872396390444772804577621670354919962.html

http://www.ibtimes.com/global-soybean-output-drops-futures-rise-usda-435710

Hi everyone,

I searched for the internet for different resources, and finally selected the following websites to share with you.

1.  http://www.agrimoney.com

This website has abundant information of the agribusiness area. News on agriculture commodity markets, companies, options can be easily found on this site. And you can also check the different data of the food industry there.  If you want to search for some information about the future price of the soybean, then you can click on “market”. After searching for “soybeans” on the new site, you can find a lot related news.

2. http://www.moneycontrol.com/news/

This website contains much information of different commodities.

You can get search for different latest news by clicking the following items.

3. http://www.usda.gov/wps/portal/usda/usdahome

It is a professional government website with lots of updated reliable information. The data shown on the web is really useful. We can use it to predicted the trend of the demand and the supply.

Hope the best luck to you all!

This week I chose a long buy November soybean contract (S2X). Till now I have already earned 137 dollars. There were several reasons for me to make such choice.

Firstly, on September 12, 2012, the United States Department of Agriculture (USDA) forecasted that the soybeans harvest would be less than expected. As we all known, there was a great drought in the North America few months ago. It severely impacted the output of the soybean. (http://www.ibtimes.com/global-soybean-output-drops-futures-rise-usda-435710) Since October is the harvest season of soybean, I boldly predicted that the price of the November soybean in this year will rise.

Secondly, the imbalance of the world soybean’s demand and supply will aggravate its price’s rising. We have already witnessed the decrease of US soybean’s output, and this time it’s impossible for America to make up a loss by  transferring the export demand to the South American market (because the output of the soybean in South America this year is 16.5million tons fewer than in last year). However, the demand of the soybean is still high around the world. As for China, it has imported 34.92milllion tons of soybean from January to July this year, which refers to a year-on-year increase of 21%. So the late changes in demand will limit the decrease of the soybean’s price.

All in all,  these analysis leaded to the gain in my account.

References:

http://www.ibtimes.com/global-soybean-output-drops-futures-rise-usda-435710

http://www.wzxdly.com/en/NewsView.asp?ID=76

Question:

“Northern Gateway Hearings. The Alberta Federation of Labour says the Enbridge pipeline project will actually eliminate Canadian jobs”: http://www.cbc.ca/asithappens/episode/2012/09/04/the‐tuesday‐edition‐45/

The Alberta Federation of Labour has two main criticisms of the Northern Gateway pipeline: (1) Canadian jobs would be created if the crude bitumen was refined in Canada and then exported rather than being exported directly; and (2) The pipeline will reduce the “Asian” premium, which means a higher price of oil in Canada and job loss due to the higher processing costs for Canadian refineries.

 In about 200 words carefully explain why the creation of the Gateway pipeline from Alberta to Kitimat BC will raise the price of crude oil for Canadian refineries. Be sure to include proper references to your background material. In your UBC Blog create an entry that includes the above link, my question and your response.

Solution:

The construction of the Gateway pipeline from Alberta to Kitimat BC really has a negative impact on the Canadian economics, especially on the Canadian crude oil refineries.

As Gil McGowan (The President of Alberta Federation of Labor) said,  after the construction of the pipeline, Asia countries (especially China) will be the major importer of the crude bitumen. It would lead to a decrease of the domestic crude oil supplies in Canada. So the domestic consumers and related industry who buy oil from Alberta will pay more.

What’s more, there is an “Asian premium” in this oil market. The suppliers of the crude oil would prefer to choose the buyers (Asian countries) who are willing to pay a higher price. Therefore, as crude oil is the raw material of oil refineries, the domestic producers have to pay a much higher price than current price in order to compete with the global market.

Higher cost for oil products do not just raise the cost for individuals. Industries such as transportation, fishing, agriculture, forestry, manufacturing and tourism are all affected by higher oil prices. That means, not only will it cost more at the pump, but at the lumber yard, grocerers, the drug store, airtravel, ferry fares, exports etc will also cost more.

All in all, as for the Kinder Morgan expansion and the Northern gateway pipelines, none of the extra capacity is actually for Canadian consumpton. It is all for export so this will not assist with gas prices in BC.

(price of gasoline in canada)

Reference:

1. http://www.cbc.ca/asithappens/popupaudio.html?clipIds=2275885032, 2275885888, 2275887137 (CBC Radio)

2.http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/northern-gateway-pipeline-could-raise-the-price-of-gasoline/article4522968/