As you can see, things were pretty bad for the past week. It is simply because I was too cautious and reacted too slowly to the USDA grain stocks report.
On Monday morning, everyone in class was talking about the release of the USDA reports and how the market crashed, “I will not do anything impulsive this time, I will be smart this time, and I will read some analysis on the report before I make any transactions,” I thought to myself. So I wait and wait, and finally I got home. After doing some research, I found that the whole grain commodity market is depressed by the report. The quarterly USDA Grain Stocks report stated September 1 U.S. corn inventories at 824 million bushels, which easily topped forecasts averaging around 680 million. Thus, it wasn’t at all surprising to see futures react badly, since that implies 2012/13 carryout stocks were larger than expected. December corn fell 12.5 cents and settled at $4.415 per bushel. Same thing also happened to soybeans, people expected the report to state September 1 U.S. soybean stockpiles at 124 million bushels, but the USDA put that actual figure at 141 million. November soybeans settled 37 cents lower at $12.83/bushel. I thought it would be a brilliant idea to short both corn and soybeans and cover them when the prices fell more. However, when I was trying to execute the plan, I saw both corn and soybeans were actually rebounding. So I decided to wait until tomorrow to see what will happen and maybe I can short at a higher price, which never happened.
The prices continue to drop on Tuesday and I did not really have the time to keep track of it all the time because I was focusing on the video project… After I got home, I found that the corn price was even lower than Monday ($4.36) and an analysis were saying that December corn futures is going to dip to near $4.25 or lower. And the worst part is that I actually believed this smart dude. I sold to close my long position on corn at a lost (in order to short it) and shorted about $20,000 of corn that night.
The price rebounded again after Tuesday night, and it never drop back after that. On Wednesday, U.S. dollar weakness supported commodity prices since that lowers the cost of U.S. goods to export customers, thereby encouraging export demand. On Thursday, prices continued to rise because the U.N. Food & Agriculture Organization (FAO) reduced its prediction for 2014 small grain carryout approximately 2 percent Wednesday night. When combined with talk that the storm system now moving across the Great Plains will bring strong winds with it, thereby posing a danger to drying corn stalks, traders viewed the news as supportive of corn prices.
Lastly, I just want to say I was so fortunate that I did not short soybeans together with corn on Tuesday night because soybeans price went up even higher. At a time like this, I have to look on the bright side of things, like how bad could things be? I still got about $88,000 left…
Lessons I have learned this week:
- Although impulsion is devil, being overly cautious will also result in failure. You will miss the right opportunity, sometimes forever.
- Never trust any professional/analysis completely
- Always look on the bright side of things
Next week, I will look for opportunities to cover my short position on corn. But if price continues to rise, I will set a stop order to avoid further losses.