1. Bide My Time to Offset Corn(C2Z)

In spite of losing $1000 this week for my long position on C2Z,I decide to keep holding it long next week. As I mentioned at the end of “What Went Wrong” post, I interpret the price turning around in the last few days of this week as a signal that the affection of drought on corn production hasn’t past and the demand from biofuels, livestock industries and other sources for corn still stays high.

Meanwhile,I noticed a piece of news from the website that Gulsana suggested saying that US farmers raised corn and soybean sowings even further than officials have revealed. According to the news, the influential analysis group pegged corn sowings for the ongoing harvest at 97.172m acres, up more than 750m acres on the current US Department of Agriculture estimate, which hits the 77-year top. So I hold the view that there might be more supply of corn than originally expected in the coming monthes.

Based on the analysis in two sides above,I’ll hold the long position and bide my time.Once the price goes down,I’ll offset this contrct immediately, otherwise, I’ll choose to keep holding it .

2. Take Short on Soybean

I made my decision to take short on soybean after I heard that dry conditions in Brazil’s soybean growing region are expected to allow planting there to progress at a rapid pace. News said that a total of 140 million tons of soybeans are expected to be produced in Brazil, which is a more than 30% increment from last year’s drought-ravaged crops. Accroding to the “First week up and down with Soybean futures – What Went Right?” post in Roson’s blog,I got the information that Brizil is one of the major soybean producers in the world(occupying 25% of world production) and soybeans in Brazil are planted in mid-August through mid-December and harvested during February to May. So I anticipate a huge tons of soybeans are on thier way of being planted.

In addition,the “US farmers raised sowings” news mentioned above makes me further believe that future supply of soybeans will soar, pushing me to set up my mind to take short on soybean.

Hope money rolls in!

References:

http://www.agweb.com/article/soybean_price_declines_could_continue_for_awhile/

https://blogs.ubc.ca/gulsana/2012/09/21/cool-source-of-information/

http://www.agrimoney.com/news/corn-sowings-to-hit-77-year-top-soybeans-a-record–5019.html

https://blogs.ubc.ca/rosonluo/2012/09/23/first-week-up-and-down-with-soybean-futures-what-went-right/

1. Result:Lost $1000

I took a long position on C2Z on Sep.12th, when price was 768.25,and I’ve been holding this position tile now,incurring a loss of $1000 by calculation according to the current C2Z price(748.25):   (7.4825-7.6825)*5000= – $1000.

2. What Went Wrong

The reason why I went long on C2Z was that I expected a big shortfall in corn production due to the worst drought in 50 years in US. Things went great at the beginning.I gained $687.5 from price increase on Sep.13th. But on Sep.14th,the price of C2Z plummeted from 782.00 to 748.00 , following USDA released its September World Agricultural Supply and Demand Estimates and Crop Production reports ,estimating that corn production was forecast at 10.7 billion bushels, down less than 1% from the Aug. forecast.

I consider the USDA report the main driver of the price decrease,because traders have expected a new dramatic drop in production forecast in Sep.compared to that in Aug.,not just a less than 1% down,based on the current strong demand and the severe drought.

Fortunately,C2Z price turned around in the last few days of the week after dipped,although still volatile.I interpret it as a signal that drought affection on corn is far from over.

References:

http://www.agweb.com/article/feed_demand_for_corn_deteriorating/

http://www.agweb.com/article/have_corn_bean_prices_reached_new_plateaus_/

Question: Why the creation of the Gateway pipeline will raise the price of crude oil for Canadian refineries.(#  http://www.cbc.ca/asithappens/episode/2012/09/04/the-tuesday-edition-45/#)

Response

In large probability,the creation of the Northern Gateway pipeline is going to rase the price of crude oil for Canadian refineries,based on the following reasons:

First,the main reason for Canadian government and the oil companies to build the pipeline is that exporting oil to Asia can produce big profit for Canada due to the “Asian Premium”,which means the price of each barrel of oil sold to Asia is a bit little higher than that in North America. So in order to garantee profit, the gevernment and the oil companies will make the best endeavor to secure this premium.By doing this, it will effectively raise Canadian oil price.

Second,the amount of oil produced during a certain period is relately fixed.Exporting oil to Asia will reduce Canadian local oil supply.As long as the Canadian demand for oil is not apparently goes down,the equillibrium price of oil will definetely increase.

Third,the Canadian demand for oil may increase.According to a statistics,the construction of Northern Gateway pipeline will need 6-billion ribbon of steel in total,which will push the oil price up.

Reference:

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

2.http://thetyee.ca/News/2012/02/02/Northern-Gateway-Inflationary-Threat/

3.http://www.cbc.ca/asithappens/episode/2012/09/04/the-tuesday-edition-45/#

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