Recap of Last Week’s Open Contracts
I was holding 4 long contracts for corn, 1 long contract for soybeans and 1 long contract for wheat. Since we did not trade last week because it was Midterm week, I tried to offset my long contracts to get out of the market before, but was unsuccessful. As prices for all these 3 commodities have increased moderately over the past week, I was losing profits so I planned to start the week off anew by offsetting my open contracts.
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Tues Oct.  25th
China’s demand for wheat from Australia would have a shock on the global supply of wheat (http://af.reuters.com/article/commoditiesNews/idAFL5E7LP2HV20111025). Supply of wheat on the market was expected to decrease from this, so the price should face an upward trend. For corn and soybeans from the techical analysis perspective, they show a bullish trend. Usually, when the prices of commodities are increasing, I would bid for futures long contracts. However, I was already holding long contracts for all commodities at that time, but was losing great profits. I did not understand why, because the prices indeed rallied moderately, but I was losing from my open long contracts. I decided to offset all my contracts and start anew (maybe there was a glitch since prices have not been updated since the past week….so I decided I will get out from the market first).

My findings are further strenghtened from my US exchange expert group findings, as the US dollar is expected to depreciate for a couple more days over the Europe debt crisis debate (http://www.fxstreet.com/fundamental/market-view/daily-us-forex-summary/2011/10/26/), but clearly forcasted to rebound as investors gain favour over the US dollar since the crisis has not been resolved yet. Margin balance at 77,650 by the end of the day.

Wed Oct. 26th
I was successful in ofsetting all my long contracts for all 3 commodities.. Thus, just like how I had planned, I can start anew as I now have 0 open contracts. My plan is to bid for short positions now because just like how we had predicted in our US exchange rate expert group, the US dollar has rebounded because of the European debt not coming to terms, so investors are once again turning to the safe haven “US dollars” (http://www.rttnews.com/Content/CurrencyMarket.aspx?Node=b3&Id=1742922).

With the US dollar appreciating now, prices are already decreasing as US exports are more expensive resulting in lowered demand for their exports, and thus supply is more abundant, driving the prices down. Indeed, all prices for the 3 commodities have already shown a decrease in their prices, so I am going to bid for short contracts. Since I was not holding any open contracts, I decided to bid for 5 short, 4 short, and 4 short for corn, soybeans and wheat, respectively.

Usually I would only bid for 2 to 3 contracts each time, but since I was out of the markets at that moment, even if I was successful in my bids, the most number of open contracts I would be holding would still only be 5 short for corn. This is not too risky in my opinion, because I still have the flexibility to turnaround and offset immediately should I need to, and also because prices were already decreasing due to the US dollar appreciating. Margin balance at 77,700 at the end of the day.

Thurs. Oct. 27th

I am glad that I have left myself with flexibility to offset my open contracts should I need to because now, I really need to! The futures prices for both soybean and corn are higher because of support from a more positive economy outlook now after the EU debt crisis agreement news (http://www.porknetwork.com/pork-news/latest/Crop-markets-close-strongly-higher-on-Thursday-132729088.html).

On top of this, the U.S. dollar index has fell lower because of they are increasing their money printing, and thus increasing the amount of US dollar supply on the world market. In fact, due to the increased money printing, it has now reached a six-week low due to being overly inflated and is also forcasted to have a downward trend in the short term (http://www.forbes.com/sites/kitconews/2011/10/27/comex-gold-sees-more-solid-price-gains-amid-sharply-lower-u-s-dollar-higher-crude-oil/).

Thus, I have decided to 3 long contracts for corn, 2 long and 1 long for soybeans and wheat, respectively. I do not want to offset all my short positions at the moment yet because there is quite a bit of fluctuality right now, as well as the price of wheat is still steadily increasing. However, I do believe that that I should not hold as many short positions in case the US dollar would have a stronger effect on the commodities’ pricings soon.
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My current margin balance is 67,450. RIght now, I am holding 7 open contracts across the 3 commodities: 2 short, 2 short, and 3 short positions for corn, soybeans and wheat, respectively. For the upcoming trading week, I plan to pay more attention onto the US dollar index movement as I believe the EU debt crisis will have a significant impact on the commodities’ prices.

Recap of Last Week’s Open Contracts
I was holding 1 long contracts for corn, 2 short contracts and 1 short contracts for soybeans and wheat, respectively. I have been trying to offset my short positions since last week as prices of commodities have rebounded. However, I was able to only successfully offset corn.
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Tuesday Oct. 11th
Although it has not been confirmed as of yet, but China is expecting to increase their demand for corn. Thus, because of China’s expected huge corn demand, I predict that the prices of corn would continue to rally. However, I will do this cautiously to leave myself with some flexibility as I am already holding 2 long contracts for corn. Weather news have reported that harvest may be delayed for about a couple weeks, meaning corn supply would not increase yet. However, once harvest takes place, prices could possibly decrease so I decided to bid for 1 long contract in corn.

Soybeans and Wheat – Prices have rebounded since last week, so I wanted to offset my open contracts. News have reported that although there is a lower demand for soybeans than anticipated, the soybeans production was also lower than predicted. Thus, I decided to bid for 3 long contracts, because if I successfully offset my 2 short contracts, I would then hold 1 long contract. The demand for wheat has fallen, and Russia’s government said that fees for wheat (grain) exports would be imposed as an action to prevent grain exports. Thus, supply for wheat on the market would expect to decrease so prices should increase. I decided to bid for 2 long wheat contracts.   Profits = Corn:2250, Soybeans: -7720, Wheat: -2660. Margin balance at 74630 (decreased from 82,760 last week) by the end of the day.

Thursday Oct. 13th
China has confirmed on their huge purchase of corn, so I expect the price would continue to rally. I decided to bid for 2 long contracts because from news articles and reports, I predict that China’s demand for corn should have a significant impact on the corn price. Indeed, corn price has already been reported to increase since a couple days prior to the news release. This reflects the impact that China has on the corn market with its huge demand. Furthermore, USDA’s National Agricultural Statistics Service has reported that the crop’s forecasts of corn and soybean production both dropped from production estimates.

Soybean – USDA’s National Agricultural Statistics Service has reported that soybean production is lower than was predicted, I expect that prices would continue to rally. Furthermore, it is forecasted to be at 3.06 billion bushels, which is an 8% decrease from last year’s production. Statistics show that this forecast yield is the second-lowest yield since 2003. I predict the price would thus continue to rally. So, I decided to bid for 2 long contracts.

Wheat – From the research that I have gathered this week, it seems like it has been a roller-coaster week for the wheat market. From the technical analysis p.o.v., the wheat price has rebounded and recovered some ground from last week’s low. Also, the Russian goverment has announced an export tariff about to be introduced in Russia, as an attempt to prevent exports (so their wheat prices would decrease domestically). This would then lead to a decrease of supply on the global wheat market, so prices should be expected to increase. However, the US Department of Agriculture has reported that there is a much larger global wheat supplies than expected, which caused the wheat price to decrease on Wednesday. This is the largest stock for the last 10 years and 7 million more tonnes than traders had originally anticipated. Thus, due to contradictory factors, I decided to get out from the wheat market to observe what is going on and which factors are influencing the price most significantly first. I took 1 short position to offset my 1 open long contract. Profits-> Corn: 400, soybeans: 650, wheat: 230.  _______________________________________________________________________
My current margin balance is 77, 080. At this moment, I am holding 4 long contracts for corn, 1 long contract for soybeans and 1 long contract for wheat. I’m going to observe the market and am planning to reattempt in offsetting my open long contract for wheat to get out from the wheat market. I will research on the different factors that will have an effect on the wheat price and try to determine which factor(s) would be the most influential before I take any further action on wheat bids.

References:
FRE 501 Twitter
FRE 501 WIKI  http://wiki.ubc.ca/Course_talk:FRE501
News Articles: Corn and Soybean Production Both Drop on USDA Forecasts http://nationalhogfarmer.com/nutrition/corn-soybean-production-drop-1012/

Russia said it could introduce a new cap on grain exports http://www.ft.com/cms/s/0/b2ffc95a-f42f-11e0-bdea-00144feab49a.htmlhttp://www.washingtonpost.com/business/markets/corn-and-wheat-prices-fall-after-usda-predicts-bigger-surpluses/2011/10/12/gIQALMSgfL_story.html

Recap of Last Week’s Open Contracts
I was holding 2 long contracts for corn, 6 short contracts and 4 short contracts for soybeans and wheat, respectively. As prices for all these 3 commodities have fallen dramatically in the last while, predictions are that they would rebound soon. The question was really when.
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Oct. 3rd Monday
Corn production has increased due to weather, and price plunges to their lowest price in 10 months -> Price is dropping further, so I am going to take on short position by offsetting my 2 long contracts. However, I will do this cautiously to leave myself with some flexibility should the price starts to rally. I decided to bid for 5 short contracts because if I offset my 2 long contracts, I would hold 3 short contracts. This would then allow me to observe the market but still have the flexibility to offset immediately should I need to.

Wheat and Soybeans -> Prices for both commodities are reported to be dropping due to decreased demand and increased supply. Dry weather this season has  been a boost to wheat  production. Technical analysis also suggested the prices are looking bearish. With these factors in play, I decided to bid for 3 short contracts each in soybeans and wheat. Ended up Losing profit of 1560 (but that’s totally fine, as I am trying to reason out my bid decisions from research and discussions; not trying to gamble to earn big!) with a margin balance at 78,090 now.

Oct 5th Wednesday
Since my previous bids were successful, I was still holding the same number of open contracts. The corn prices are fluctuating a bit, and it was difficult to predict whether it has reached its bottom yet, so I decided to get out from the corn market by offsetting 2 long contracts through bidding for 2 short contracts. I decided to take 2 long soybeans contracts as reports are also speculating that price of soybeans may be at its bottom as well and expected to increase.

Supply of wheat is expected to be above its forcased production. However, because its price has been decreasing, I did not predict that it would continue to decrease. I decided to take 1 short contract to leave myself with sufficient flexibility to offset should the price starts to rally. Margin balance at 80,530 by the end of the day.

Oct 6th Thursday
Prices for all commodities increased. I was still unsuccessful in offsetting my short contracts for soybeans and wheat. Thus, I was more determined this time to offset  short contracts in case the prices do go up. As there was confusion among traders whether prices have hit their bottoms yet, I bid cautiously instead of aggressively as I did not have much confidence in how dramatic the prices would actually change. So, I took 3 long positions to get back into the corn market, and 3 long positions each for soybeans and wheat to offset some of my short futures contracts. Margin balance that day was 81,310.

Oct 7th Friday
Production of corn  expected to decrease in yields due to rainfall, so I predict that the futures price would rise for corn. However, rainfall would help with the wheat germination and thus, raise its supply, but I also read news that rainfall could be a double-edged sword for wheat because farmers will have difficulty harvesting the wheat due to the heavy rainfall after the prolonged dryness. Soybeans production has increased, but rainfall may cause damage to some of the supply. Because of uncertainty, I decided to take 1 long position for each of the 3 commodities since I predict that prices would increase.  ______________________________________________________
My current margin balance is 82,760. At this moment, I am holding 1 long contract for corn, 2 short contracts for soybeans and 1 short contract for wheat. I’m going to observe the market and am planning to offset the remaining open short contracts that I’m holding by taking long positions if the prices rally next week. If the outlook is going to be bearish, I am planning to offset my long position in the corn market.

REFERENCES
FRE 501 Twitter
FRE 501 WIKI  http://wiki.ubc.ca/Course_talk:FRE501
News Articles:
Corn/Wheat Production http://www.agrimoney.com/news/grain-prices-dip-after-us-finds-extra-corn-stash–3665.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+WorldcropsRSS+%28WorldCrops+RSS%29&utm_content=Google+Reader