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