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Sep 23 / Roson

First week up and down with Soybean futures – What Went Right?

This is my first trade and I started my trade with soybeans.

First of all, I wanted to know more about soybean itself and as a commodity:

  • What are they used for [1]?
    • Direct human consumption, processed into other foods for human consumption
    • Processed into animal feed
    • Used to produce biodiesel fuel
    • Used in the production of industrial products like oils, plastics, etc
  • Who are the major producers and consumers [1]?
    • The US, Brazil, Argentina and China
    • The US is the largest consumer
  • What are their planting and harvest seasons [2]?
    • In the US the biggest soybean producer, the planting period is late April to June and the harvest period is late September to the end of November
    • The planting and harvest period in countries in the Southern hemisphere is about the opposite to the countries in the Northern hemisphere.
In the US, the harvest period of soybeans has begun.  The major production of soybeans is at the Midwestern states [3] and the drought since May[4] this year has hit the Midwest of the US most severely too.  Since soybeans growth depends on natural rainfall, the soybeans supply has been expected to be tightened, resulted in the general increase of the  price of soybeans futures.

US Soybean Production Areas
Source:Alberta.ca, Agriculture and Rural Development [3]

 

However, it’s reported that there was rainfall in the Midwest and Delta areas in the US at the beginning of the week.  I believed that the rainfall would cause the high price of soybeans futures to go down.  That news was reported on Tuesday and I went in the market on Wednesday with a short contract for Jan 2013 soybeans.  On the first day in the market, I lost about $300 because the settle price of that contract on Wednesday actually went up a bit from Tuesday’s . On the second day, the market seemed to have picked up the rainfall news and another news about a higher expected yield of soybeans[5];  I gained about $ 2500 for a bigger price fall on Thursday. On the third day, I lost about $200  for a price increase and I went long to offset my order.  Overall, I gained about $2000 over that 3 days Jan 2013 soybeans contract for short.

 

Although there were ups and downs of the price (volatility), it tend to be going down with a bigger scale (a downward trend).

 

 

References:

1.Wikipedia. (2012, Sept.).  Soybean.  Retrieved from http://en.wikipedia.org/wiki/Soybean

2. Kowalski, Chuck. (n.d.).  Soybean Planting and Harvest Seasons. Retrieved from http://commodities.about.com/od/profilesofcommodities/a/soybean-growing.htm

3. Government of Albert. (2011, Jan. 01). Market Clippings: US Crops – Where Are They Grown?.  Retrieved from http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sis5219

4. NOAA National Climatic Data Center. (2012, May-June). State of the Climate Drought May 2012. Retrieved from http://www.ncdc.noaa.gov/sotc/drought/2012/5

5. Wilson, Jeff. (2012, Sept. 20).  Soybeans, Corn Decline on Signs Midwest Rain Boosts Crops. Retrieved from http://www.businessweek.com/news/2012-09-20/soybeans-corn-decline-on-signs-midwest-rain-boosts-crops

 

 

Filed under Trading Game, What Went Right/Wrong

2 Comments

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  1. Yijeong / Sep 27 2012

    I like your research. Did you have any problem on understanding the equity balance on the daily report from TradeSim? If you need help, please let me know.

    Reply
  2. Roson / Sep 30 2012

    I will thanks Yijeong!

    Reply
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