Day: September 30, 2012

Categories
Cool Source of Information Trading Game

Cool Source of Information – USDA reports

In the past week, we just had an assignment with a question where we needed to examine the USDA reports on Crop Production over a historical time period and see whether there’s link between the shocks of futures prices and the released information.  What’s more interesting is that a new UDSA report on quarterly Grain Stocks was released on the past Friday and caused the corn, wheat, soybeans futures prices to spike up.

I didn’t pay attention to USDA (http://www.usda.gov/wps/portal/usda/usdahome) prior to the assignment or the Friday shocks.  Its official information really plays a major role in affecting the futures prices.  The daily news prior to the official reports could be affecting the futures price too but those are more like expectations / estimations, and the official reports are stating more accurately about the situations supported by government statistical data.  Sometimes, if there’s large discrepancy between the estimations and the actual situation, it would probably cause a turning point for the futures prices.  It’s worthwhile studying this USDA site further since I am not sure of what other information it offers.

I have been using the sites I referred to in the previous week.  I should start looking for more reliable sources for information.

 

Categories
The Road Ahead Trading Game

The Road Ahead with 3 crops

I knew that wheat and corn futures prices fell quite a bit last week before Friday.  I was planning to went in the wheat or corn futures market and take a long position at their low prices.  After I decided to do that and before I manage to do so, the corn and wheat futures prices already jumped a sky high on Friday morning.  I started to doubt whether I should still go in the market and what position I should take. I remember there were news about some kinda of report to be released on Friday, but I wasn’t sure what it was about.  Thanks to fellow student, classmate Ishrat’s tweet (@ishrat_gadhok)[1],  I found out that USDA released the quarterly Grain Stocks report about the stocks of corn, wheat, soybeans having gone down[2].  The futures prices of corn, wheat, soybeans all went up at the result of that, expecting shrinking supplies of all 3 crops.

I expect the soybeans futures prices to go higher so I have placed orders to offset my short contract and go long.  I also ordered to offset my long contract because its price now is still lower than my price in when I purchased my contract last week.  I placed a long contract again to get in at a lower price hoping to make a bigger profit when the price indeed goes up.  Soybeans can be substitute to corn. Since corn futures prices have already gone high up and soybeans haven’t yet, there should be more room for the soybeans futures prices to rise.

I expect the corn and wheat futures prices to continue to go up but I am not sure how long that will sustain.  I will go ahead with a long position in both of corn and wheat futures and  pay close attention to the news closely.

 

References:

1. @ishrat_gadhok. (2012, Sept. 28). Tweeter. Retrieved from https://twitter.com/ishrat_gadhok

2. USDA. (2012, Sept. 28). Grain Stocks. Retrieved from http://usda01.library.cornell.edu/usda/current/GraiStoc/GraiStoc-09-28-2012.txt

Categories
Trading Game What Went Right/Wrong

Week2 – What Went Wrong with far futures

On Monday, I placed orders in the market with a short contract of Nov 2012 soybeans and a long contract of May 2013 soybeans. They didn’t get processed until Tuesday and I left them till the end of Friday. I thought the Nov 12 soybeans price would go down because there had been news about unexpected good harvest of soybeans; with better than expected production/ supply of soybeans,the futures prices of them should be going down. On the other hand,  there was the news  that China [1], the largest soybeans importer from US, would continue selling its soybeans reserves well into 2013 to contain its inflation domestically. I suspect this news would cause the near soybeans futures prices to go down and the far futures prices to go up, with the expectation of a lower level of export demand in the near future and (at least) back to normal export demand in the far future.  Altogether, I made the decision to have a short position for Nov 2012 soybeans and a long position for May 2013 soybeans.

A week went by, the soybeans futures prices went down and back up to the prices level that’s still lower than my prices in.  I made a gain of about $250 (my gain from a short on Nov 2012 less my loss from a long on May 2013 soybeans).  The re-bound on Friday (Sept. 28) was probably a result of the release of USDA Grain Stocks report where it stated that the soybeans stocks was down 28 percent [2].  In fact, the corn and wheat futures prices had a large rebound on Friday as well after the plunges earlier.  The prices of a few corn near futures even hit a daily limit up.

My “prediction” of the far futures of soybeans was not correct or the one was just not enough/sufficient information for a great impact on the far futures.  However, the daily news that affect the spot prices are really impacting the futures prices as well for the link between the spot price and futures price is strong, the closer the stronger.

 

References:
1. Reuters Africa. (2012, Sept.21).  GRAINS-Soybeans edge up, but remain on track for biggest weekly fall in a year.  Retrieved from http://af.reuters.com/article/commoditiesNews/idAFL4E8KL04Z20120921

2.USDA. (2012, Sept. 28). Grain Stocks. Retrieved from  http://usda01.library.cornell.edu/usda/current/GraiStoc/GraiStoc-09-28-2012.txt

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