What went right/wrong (week 8)
Last week was a risk-more-gain-more week for me. After three boring weeks while I had a spread on corn and nothing memorable happened, I decided to lift my spread and to go for a bigger gain. Of course, this could have turn into a bigger loss, but if you don’t risk you don’t gain. I offset 2 soybean contracts and 2 corn contracts and I lift my gains with $7000… finally J
Week 7 Week 8
Equity: $48868.40 Equity: $55774.94
Realized Gains: $6058.50 Realized Gains: $13079.50
What happened on soybean and corn market last week?
Soybean:
Soybean faced a drop in price, therefore my short contracts that I set off on Friday add me positives profits. One of the reasons is that U.S. soybean futures fell on Friday after the U.S. Department of Agriculture forecast a larger-than-expected national soybean harvest.
The drop in soybean price is, therefore, the result of a higher expected crop around the world.
The 2012 U.S. soybean crop is forecast 111 million larger than the October forecast and 80 million larger than the average trade guess. Outside the U.S., production forecasts were increased slightly for Bolivia and the Ukraine. In South America were more rains and therefore is expected a record crop from Argentina and Brazil.
The larger than expected harvest determines the projection of world stocks for soybean to increase by 90 million bushels (4.3 percent).
Corn:
The 2012 U.S. corn crop was also forecasted with 19 million bushels larger than the October forecast. The production forecast for the rest of the world (Mexico, Europe, Southeast Asia and Russia) was also higher than the October forecast. In the same time, the forecast of the Argentine crop was not reduced as some thought might happen, and the projection of year ending stocks exceeds expectations.
As a result of larger corn harvest, the projection of ending stocks was increased by 28 million bushels.
The road ahead
For the week ahead I plan to off set more of my short contracts on soybean and corn, even though the prices of these crops is expected to have a downward trend and waiting could result in a bigger gain.
As we can found from news, soybean prices are in a clear downtrend and there are some chance that South American production risk is now being under-valued. The soybean market will now be influenced by the on-going rate of consumption, particularly the pace of exports. Some recent sales cancellations reflect the substantial price decline since early September and prospects for a large South American crop.
Corn prices are expected to remain in the sideways pattern experienced over the past six weeks. On the demand side, an increase in the expected consumption for food and industrial purposes is expected. Also, a decrease in China demand for US corn, as China and Ukraine have signed a deal stipulating Beijing will lend Kiev $3 billion in exchange for around 3 million tons of feed corn, adding the agreement could eventually extend to soybeans and canola.
Cool sources of information
http://www.agriculture.com/markets/analysis/soybeans/soybes-sink-on-bearish-usda-data_10-ar27441
http://www.farms.com/news/soybean-futures-price-drop-on-brazilian-crop-news-56595.aspx
http://www.agweb.com/article/u.s._corn_and_soybean_production_forecasts_are_larger_than_expected/
Good going! Thanks for sharing.