The combination of factors suggest me I should take a “retreat” attitude this week; However, there’s quite a bit of information suggests that there will be further price drop in corn, soybeans and wheat futures. First of all, US dollar is strengthening [1]; US economy is improving and expecting a good recovery. Secondly, the oil price has dropped due to a forecast of reduced global demand by International Energy Agency[2]Thirdly, according to the news gathered below, yet, not exhaustively, it does seem that the futures prices tend to drop this week.
Corn:
- Argentina’s revamped corn export policy[3] (-)
Soybeans:
- More export sales (+)
- Higher production/ good supplies from South America (e.g. Brazil, Argentina )[4] (-)
- Cut in palm oil export tax next year in Malaysia leading to the drop of palm oil price [5] (-)
- Good opportunity of open market access and predictable trade access in the Asia-Pacific region with Canada entering Trans-Pacific Partnership [6] (-)
Wheat:
- Unexpected drop in exports [7] (-)
- Reduced projected production in Russia and Australia (+)
- Argentina’s revamped wheat export policy which leads to immediate increasing wheat planting [3] (-)
1.RTTNEWS. (2012, Oct 15). U.S. Dollar Strengthens Against Majors. Retreat from http://www.rttnews.com/1982877/u-s-dollar-strengthens-against-majors.aspx?type=cm&utm_source=google&utm_campaign=sitemap
2. Kwiatkowski, Alexander. (2012, Oct 14). TOP Oil Market News: Crude Falls After Iran Offers Nuclear Talks. Retrieved from http://www.bloomberg.com/news/2012-10-15/top-oil-market-news-crude-falls-after-iran-offers-nuclear-talks.html
3. Ahad , Abdul (2012, Oct 13). New Argentine corn, wheat rules help farmers sales. Retrieved from http://www.brecorder.com/markets/commodities/america/85668-new-argentine-corn-wheat-rules-help-farmer-sales-.html
4. McFerron, Whitney. (2012, Oct 12). Soybeans Drop as Supply Concerns Ease After USDA Report. Retreived from http://www.bloomberg.com/news/2012-10-12/corn-trims-weekly-advance-on-speculation-rally-may-cut-demand.html
5. Ahad, Abdul. (2012, Oct 13). Palm oil down in export cut news. Retrieved from http://www.brecorder.com/markets/commodities/europe/85652-palm-oil-down-on-export-cut-news-.html
6. The Crop Site. (2012, Oct 11). Trans-Pacific Partnership Entry Good News for Canola. Retrieved from http://www.thecropsite.com/news/12166/transpacific-partnership-entry-good-news-for-canola
7. McKiernan, Patrick. (2012, Oct 12). Wheat Futures Fall as U.S. Exports Decline: Commodities at Close. Retrieved from http://www.bloomberg.com/news/2012-10-12/wheat-futures-fall-as-u-s-exports-decline-commodities-at-close.html
I started this week with lots of hope. I was planning and hoping to make a strong comeback on Thursday as the USDA report was being released. However, something happened. No only my hope went dashed, I am left with a negative balance in my trading account now.
What happened? Accidentally, not according to my will, 23 short corn contracts (C2Z) got in my trading account and were executed on Wednesday; I was totally shocked and I was also happy for a moment because they were making profits on Wednesday as the corn futures (C2Z) price fell that day. I soon got scared as I anticipated a price jump on corn futures on Thursday with the release of the USDA report. It’s based on the information and analysis from a few sources before Thursday:
- speculation about USDA would lower its forecasts on global supplies: dry weather damaged crops from Russia to Australia; Russia cut its forecast for grain export, Australia last month reduced its harvest projection [1]
- on average, analysts expected the corn production would below the USDA September estimate due to the reduction in harvested acres[2].
Source: The Crop Site [2].
- Also, there’s a corn futures contracts continuous chart for the past 20 years indicating the rise in October.
Source: Equity Clock [3]
Therefore, I placed an order to offset all those short contracts on Wednesday night. I did something similar once before where I placed an order at night and the order got processed the next day once the market opened with the open price. I basically trusted that TradeSim would treat my offset with as open order and gave them the open price. The prices did go up on Thursday by quite a lot. However, the offset didn’t happen in time as I expected and those 23 short corn contracts got offset at a much higher price. I lost $1463.50 per contract which lead to a total loss of $33660.5; together with the losing long wheat and soybeans contracts I have been holding since 2 weeks ago purchased at the peak prices, my equity was down to about $100 at the end of Thursday.
I did order to offset the long wheat and soybeans contracts on Thursday, yet with price limits which was not hit. On Friday, all the crop futures prices went back down and my long contracts once again suffered further loss which lead my balance down at about -$2000.
It’s a dramatic and traumatic week. Although the 23 contracts got in by mistake/ accident, I could have not lost that much by making a stop loss order to offset or just keep them till Friday. This is a big lesson to me.
Thanks VW for encouraging me to write this blog and helping me recover from the trauma.
References:
1. McFerron, Whitney and Dreibus, Tony C. (2012, Oct 09). Wheat Climbs as U.S. May Cut Supply Estimates; Soy, Corn Gain. Bloomberg. Retrieved from http://www.bloomberg.com/news/2012-10-09/wheat-climbs-on-speculation-u-s-to-cut-global-supply-estimates.html
2. Meyer, Steve and Steiner, Len. (2012, Oct 09). CME: Harvest Pressure Pushes Corn, Soy Futures Lower. The Crop Site. Retrieved From http://www.thecropsite.com/news/12158/cme-harvest-pressure-pushes-corn-soy-futures-lower
3. Equity Clock. (n.d.). CORN FUTURES (C) SEASONAL CHART. Retrieved from http://charts.equityclock.com/corn-futures-c-seasonal-chart
I have come across 2 cool websites this week and extended use in one of the previous ones:
New:
- Weather Underground: I like the way they allow you to select the types of map (eg. temperature, precipitation, snow depth, etc.) you want, as well as the regions of map (e.g. entire US, US midwest,etc) you want. http://www.wunderground.com/US/Region/US/2xTemperature.html. This website comes handy if you want to get a quick idea of how the weather condition is in the area of crop production.
- Farm Business Communications Grainew.ca: This is a Canadian website and it publishes crop news with a focus on the crop situations in the US and Canada. It also publishes news of other categories to do with agricultural such as livestock, the market, general, etc. This website is easy to navigate and it could be a cool site to find relevant news from different aspects. http://www.grainews.ca/issues/search.aspx?qt=ts&tid=111&topic=Crops
- Bloomberg – Exchange Rate: Reminded by Professor Vercammen, exchange rate is also an important aspect to look at when we handle our trades. I think this could be a place to go for global news about exchange rate. http://topics.bloomberg.com/exchange-rate/
Enjoy!
As mentioned in the previous post, I got my long contracts on wheat and soybeans last Monday at their high prices and their prices went through a big dive during the week leaving me an unrealized loss of about $4000. I am keeping the contracts to wait for their prices to go up to a point where I believe I could minimize my loss as much as possible (reducing the loss and risks induced by new uncertainties, etc) .
I certainly don’t like my trading game to turn into a loss minimizing game. This “damage control” has become my overhead and a good reminder of me to stay on top of my tradings. I will make new purchases as I find my justifications along the way with the daily news.
So far, I have got news about soybeans[1] which indicate there might be increases in the soybeans futures prices:
- export sales jumped to a three-month high last week
- oilseed demand is renewed by the price drop
1. Plume, Karl. (2012, Oct 5). U.S. corn eases on harvest pressure, soybeans level . Retrieved from http://www.grainews.ca/news/u-s-corn-eases-on-harvest-pressure-soybeans-level/1001747419/
2. USDA. (2011, Dec. 19). Schedule of 2012 release dates of cotton reports issued by the U. S. Department of Agriculture. Retrieved from http://usda.mannlib.cornell.edu/usda/ams/CNAASRD.pdf
This week, I have learned quite a few lessons:
- Don’t expect you can gain anything while not putting in any or much effort (at least a certainly No for me);
- Don’t make any hasty decision (while you haven’t really thought it through);
- Please don’t make any major move because you are desperate.
The corn, wheat, soybeans futures went high up last Friday after the release of the USDA quarterly Grain Stocks report. I expected that wheat and soybeans prices would at least go up for another day (ie. Monday), simply based on the lower than expected stocks reported and the fact that a few of corn futures went limit up while wheat and soybeans futures didn’t. I was not 100% sure about my expectation/intuition but I still went ahead and placed orders to offset all my soybeans contracts (1 short on Nov 2012, 1 long on May 2013) and ordered 1 long on Nov 2012 soybeans and 1 long on May 2012 (at a lower price than the price-in of the long contract I just offset). I also ordered 1 long on Dec 2012 wheat. I placed the orders over the weekend so they got in when the market opened again on Monday.
I didn’t get to pay attention to the news or prices until late on Monday, only to find out all wheat and soybeans futures prices fell that day, corn futures continued to rise. It turned out to be totally opposite to my expectation. From my prices in, there was about 7 cents fall for the Dec 2012 wheat, 13 cents fall for the Nov 2012 soybeans and 10 cents fall for the May 2013 soybeans. I lost about $1500 on Monday. I saw on the news that the slow export demand and rain forecast in the drought areas expected to boost the winter wheat seeding which were probably the reasons driving down the wheat futures prices. As for soybeans, it seems that the soybeans futures prices (became weak) went down with the downward prices of palm oil (substitute to soybean oil)[1] . I didn’t think much and just kept my contracts there. Their prices continued to fall on Tuesday and fell to quite low points which increased my loss to about $5000. I know the news was still about the rain and it’s possible the prices would still go down. However, I really don’t want to offset my contracts and realize such a big loss. I decided to keep my long contracts and, on the other hand, ordered 2 short contracts on Jan 2013 soybeans, in the hope of gaining something back (in a short term: 1-2 days) while waiting for the overall prices to go back up (in a long term).
I initially wanted to place 20 short contracts on Jan 2013 instead of 2 to “compensate for the loss” (with a big IF, if the price would continue to fall). I am glad I didn’t do that because the soybeans futures prices actually went up a bit on Wednesday and went up quite a bit on Thursday due to unexpected low yield of Canada’s canola crop (substitute)[2]. I regretted my decision and placed to offset the 2 short soybeans contracts which came through on Friday with a realized loss of $2151. I think I really need to regroup and straighten out my thoughts before I make any future moves. Therefore, I am still keeping the long contracts: 1 long on Dec 2012 wheat, 1 long on Nov 2012 soybeans and 1 long on May 2013 soybeans with an unrealized loss of about $4000.
My conclusion is no more hasty decision or neglection is allowed!
References:
1. Naeem, Asad. (2012, Oct. 1). EU wheat follows falling US futures after sharp rally. Retrieved from http://www.brecorder.com/markets/commodities/america/82883-eu-wheat-follows-falling-us-futures-after-sharp-rally-.html
2. Plume, Karl and Arasu, K.T. (2012, Oct. 4). U.S. soybeans rally on damage to canola crop. Retrieved from http://www.grainews.ca/news/u-s-soybeans-rally-on-damage-to-canola-crop/1001744212/
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.
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.
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
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
I started out my research with Google search engine and I did notice a few websites that follow the commodity market quite closely and produce timely updates about the crops in the commodity market. Here are a few websites I found this week that provided me useful information:
- Reuters US (http://www.reuters.com/):
- Reuters[1] is the world’s most renowned news media, it is widely recognized as a credible source of global news and analysis, etc.
- You can find the news about the crops: corn, wheat, soybeans by using their search engine (For example, for soybeans news, you would have the most updated lists of news here: http://www.reuters.com/search?blob=soybean).
- Agriculture Alberta (http://www.agriculture.alberta.ca):
- This website is published by Government of Albert, it has information, news about Alberta and Canadian agriculture business and market; It also have information,news about the global agriculture market. I found the information of US crops production areas from their site (http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sis5219).
- What’s more, it has a weekly audio update interviewing industry professionals about the Grains and Oilseed market; global and local highlights, some analysis and forecast will be delivered every Friday. The report they had this week about soybeans has a good summary of the soybeans market and more (http://www1.agric.gov.ab.ca/$department/newslett.nsf/all/cotl19969).
- Bloomberg (http://www.bloomberg.com/): It is an American multinational mass media[2]. Quite a few news articles about soybeans I read this week were published by them.
References:
1. Thomson Reuters. (2012). Awards & Recognition. Retrieved from http://thomsonreuters.com/about/awards_recognition/
2. Wikipedia. (2012,Sept.). Bloomberg L.P. Retrieved from http://en.wikipedia.org/wiki/Bloomberg_L.P.
Price chart of soybeans futures
Jan 13 contracts from May to Sept. 2012
Source: CME Group, Agriculture Products, Soybeans Futures [2]
I could start looking at the corn or wheat futures market if time allows.
1. Wikipedia. (2012, Sept.). Soybean. Retrieved from http://en.wikipedia.org/wiki/Soybean
2. CME Group. (2012, Sept.21). Soybeans. Retrieved from http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean.html
