Actually this was writtien on Sept. 30 and somehow it was saved in the draft box instead of being published… Here we go…

I went short on Corn (C3H) this week, it went on as I predicted in the beginning days but on Friday price in one day increased by (719.50-748.25)/748.25=3.842%, because of the release of annual stockpile data report.

Domestic corn inventories totaled 988 million bushels as of Sept. 1, the lowest level in eight years, the Department of Agriculture said Friday in a closely watched quarterly grain-supplies report. Corn supplies were below the average analyst forecast of 1.126 billion bushels in a Dow Jones Newswires poll this week.

There’s also an interesting trend about Euro to U.S. Dollar exchange rate:

Which indicates demand for U.S. dollars would keep going up.  Thus, prices of U.S.domestic commodities are supposed to rise.

In the coming week, the first thing to do is to offset the short contract, because the price is most likely to continue running up.

http://online.wsj.com/article/SB10000872396390443389604578024180178198160.html

http://www.forecasts.org/euro.htm

Below are some sources I have been using since the start of this term:

http://www.commodities-now.com/ Commodities Now

http://www.commodityonline.com/ Commodity Online

These provide selected information about a variety of commodities, and they also gives insights of how differentiate news are related to  commodities that we are interested in. For example, in http://corncommentary.com/2012/09/24/no-farm-bill-now/  it briefly explains how farm bill works and how past farm bills affected the commodity market, not necessary to search “farm bills” then.

In library I found a book “Methods to analyse agricultural commodity price volatility” by Isabelle Piot-Lepetit; Robert M’Barek. It was published in 2011, which is quite up-to-date. I will probably read it in the coming long weekend.

In the 1st trading week, I followed some interesting sources and went short on soybean, and turned out it worked. So this week, I visited the same information site and hoping I could get what I need.

http://corncommentary.com/2012/09/24/no-farm-bill-now/

http://www.ncga.com/drought

One of which is about farm bill is not going to happen this year, which underlines that exporter would be restricted, domestic supply would increase and price should be lowered. And the other report indicated the drought is getting alleviated, which indicated the same price trend( going down) as the first report.

I went sell for 1 contract of CH3 on Sept. 25th, the price-in of which was 748.25 cents. And it went quite well at the start. price fell (to 728.50 cents) as I expected on the first day and on the second day, price fell to 719.50 cent. I didn’t offset it because the I was hoping price to keep falling. But on the third transaction day, price increased dramatically! It got to 759.90 cent and I lost ( $7.5990-$7.4825)* 5000=$562.50.

Below is a report released on September 28, 2012, by the National Agricultural Statistics Service (NASS), Agricultural Statistics Board, United States Department of Agriculture (USDA). In which shown majority grains stock this year drop a lot. Corn stocks, down by 12 percent compared to last year.

http://t.co/Hb9V82eo

“Old crop corn stocks in all positions on September 1, 2012 totaled 988 million bushels, down 12 percent from September 1, 2011. Of the total stocks, 314 million bushels are stored on farms, down slightly from a year earlier. Off-farm stocks, at 675 million bushels, are down 17 percent from a year ago. The June – August 2012 indicated disappearance is 2.16 billion bushels, compared with 2.54 billion bushels during the same period last year.”

As learned in class, this release would reverse the commodity market, because now everyone believes price would increase by the future ending day due to stock scarcity.

I searched for ” commodities” in twitter and found several interesting “people”. I am following Commodity Online and Commodities Now.

The two interesting sources I used for this week’s trade are:

http://www.commodityonline.com/news/the-trend-reversal-pattern-what-it-means-for-castor-seed-prices-50395-3-50396.html   I found on Commodity Online

and

http://www.commodities-now.com/error-404-page.html  I found on Commodities Now.

As I mentioned I made that shorting decision so irrationally, I think my gain is partly from luck, so I would dig the reasons why price of soybean did decline in the past week and prepare thoroughly for the next trading week.

I read some of the blogs the others wrote, and these brilliant minds give me inspirations. One mentioned that the on-going harvest lowering price is not due to the excess supply but due to the fact that storage for corn through the non-harvest months is costly. This harvest time is referred to as ” stock-out” phase in terms of considering storage cost.This is interesting because now I do realize how useful it is to apply textbook and lecture knowledge.

I saw many people went long on whichever commodity because they took consideration of the drought in the States. Many loss from this decision because they have not read enough information about the recent rain in some areas, which helped the harvest, and increased the price. What I can learn from these blog entries is that ALWAYS looking at weather conditions.

This first week of trading did encourages me because I got positive gains (even though it’s not really money). On Sept.19th, I shorted on soybeans S2X, the price-in of which I got was 1655.5, and the current price of it is 1621.75. And the amount I bought was one bushel.  Buying the contract three days, I gained ($16.555-$16.2175)*5000=$1687.5

I think there are several reasons that price went down, but when I made my decision to go short, I only thought of one thing: now is the harvesting season for many crops, including soybeans. As supply increases quite a bit, price falls as a result. I read this news article “speedy harvest cut grain prices” online at http://www.commodities-now.com/error-404-page.html

As a only read one piece of information to make a contract, I sincerely think my gains of this trading week are from luck. I shouldn’t have made that deal that irrationally.

Authority is doing pros and cons analysis about the construction of Northern Gateway pipeline, and Mr. McGown, President of Alberta Labor Federation, is opposing the whole idea.

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

For one thing, McGown indicates in the long run, more jobs will be killed than it will create under this Gateway pipeline project; for another, he explains crude oil price will increase because of this project so that Canadian refineries will have to bear higher costs to produce:

By the construction of this pipeline, Canadian can connect better with Asian economies, where industries are willing to pay more for crude oil because of relatively large demand. This access to “Asian Premium” will finally lead to an increase in crude oil price here in Canada, which means not only Canadian customers, but also Canadian refineries, will have to pay considerably more.