1. What I went right?
For this week, based on my last week’s analysis. I planed to use spread to earn more. In the short run, the corn price was decreasing, but in the future, the corn price would go up because of the shortage of stocks. Therefore I went a long position on July contract in 2015 and a short position on March contact in 2013. The result was really pleasing. It seemed like I made a good choice. Although I lost some money on July contract, 2015, it shows an increase trend now. Here are my account information:
|
Time |
Contract |
Quantity |
Type |
Position |
|
Oct. 23rd
|
C5N |
1 |
Market |
Long |
|
C3H |
1 |
Market |
Short |
|
|
Oct. 25th |
C3H |
1 |
Market |
Long |
Daily Price Change
| Beginning balance from 10-23-2012,Position Value: $0.00Cash Available: $41957.63Equity: $41957.63Realized Gains: $1956.00 | ||
|
CONTRACT |
||
|
DATE |
C5N (LONG) |
C3H (SHORT) |
|
Price-in |
622.00 |
767.50 |
|
Oct. 23rd |
622.00 |
756.00 |
|
Oct. 24th |
620.75 |
744.00 |
|
Oct. 25th |
622.00 |
OFFSET |
| Ending balance as of 10-26-2012, Position Value: $1080.00Cash Available: $41638.79Equity: $42718.79Realized Gains: $2717.50 | ||
2. The Road Ahead
About future stocks:
According to the news from Agrimoney.com, inventories in major exporters such as Canada, the European Union and the US are forecast to be a 3m tones drop to 96m tones. Just as IGC said, “inventories for the major exports will be even tighter and the smallest for 17 years.” The following shows more information about the stocks situation.
| IGC corn, wheat forecasts, 2012-13, change on last and (on year) |
| World corn production: 830m tonnes, -3m tonnes, (-5.3%)Corn end-stocks: 117m tonnes, -3m tonnes, (-13.3%)Stocks held by major exporters: 29m tonnes, -3m tonnes, (-24%) |
| World wheat output: 655m tonnes, -2m tonnes, (-5.6%)Wheat year-end stocks: 172m tonnes, -3m tonnes, (-12.2%)Stocks held by major exporters: 50m tonnes, -1m tonnes, (-28%) |
About Production prospects:
For corn, the production prospect was cut to below the USDA figure. It is also estimate that “northern hemisphere production prospects have mostly worsened.”
For wheat, “lower yields in the European Union and Kazakhstan, as well as deteriorating crop prospects in Argentina and Australia, reduce the forecast for world production to 655m tones,” the IGC said. At the same time, China increases imports of wheat. Chinese wheat imports look set to trounce market expectations for 2012-13, putting extra upward pressure on world prices. In Ukraine, a ban on exports of the grain will be executed from Nov. 15th.
For soybean, the IGC was optimistic to soybean production, raising their world production estimate by 8m tones to 264m tones. The weather for southern American crops plays a very key role in world soybean production.
Based on above analysis, I would go with long positions on corn and wheat, especially on 2014 or 2015 contract and a short position on soybean.
References:
http://www.agrimoney.com/news/surge-in-chinese-wheat-imports-to-set-a-trend–5139.html
http://www.agrimoney.com/news/top-exporters-grain-stocks-to-fall-to-17-year-low–5147.html
3. Cool resources
http://www.dtnprogressivefarmer.com/dtnag/home
I got this cool resource from Sean, it is a website focusing on farmers.There are a lot cool information here such as news, market, livestocks, farm business and etc. Especially, this website include many farmers’ blogs .They blog from various perspectives such as market matters, technically speaking, ethanol blogs, production blogs, policy and so on. I think this is amazing. These farmers or blogers have their own predication about the market from different viewpoint. I think this will be very helpful for us to get more information.
Hey Laura!
It seems like we are foreseeing the same wheat and corn price trends for the upcoming week! I’m thinking of going LONG on corn and wheat too! I’m not too sure about soybean though. I thought soybean future prices might rebound early next week after decreasing for 2 days straight at the end of last week. Also, soybeans and corns are close substitutes; hence, if corn price goes up, wouldn’t it make sense for soybean price to shoot up as well? Then again, soybean price has always been one of the harder ones to predict. It’s always hard to tell which way soybean prices are moving.
Adding onto your point on China increasing demand for wheat, they are also increasing imports for soybean. Domestic soybean demand has been continuously increasing, but domestic production has been decreasing for the past 5 years. It’s likely that China is going to further increase their import demand for soybean next year; and this is definitely going to effect the soybean future price.
For the soybean, i really have no idea now after you shared the information with me. China is one of largest importer of soybeans, which plays a significant role in world price. Therefore, this week I will not touch soybeans 🙂
hi Laura!!!
for wheat we have same posion.
I also expect that wheat price is increasing.
becasue the actual harvest is lower than expected harvest in US and Russia. since US curreny is weaker, world demand would be higher this could casue price to increase
hopefully we could gain some money for wheat!!!
see you tomorrow~ good night~~
Yep, wheat wheat go go go!!!!!!!!
Hi Laura! Good to know that you have gained some substantial money this week. Also, its nice to see that more and more students are experimenting with spreads. I havn’t used them to advantage myself but I after looking at your success this week I am inclined to use them for my trade next week. Reading your blog, I couldn’t help but wonder what your correct prediction might have been. Was it decreasing U.S. exports and higher U.S. dollar?
As for your Road Ahead, I am impressed with your research. And so I am guessing, based on the information in your Road Ahead, that you will again be predicting lower corn prices? Am I correct in assuming that the export bans in a few European countries will further decrease prices?
Based on your trades and information, I would like to suggest you the idea of trading in wheat as well. I have found that wheat generally follows the path that corn treads. This as you may have figured out is because of their substitutability characteristics. But, I just thought that if you make similar trades in wheat, keeping everything similar, you will also realize hefty gains in wheat market, just because they are similar and substitutable.
I hope to read more of your blogs in the coming weeks!
Thanks for your comment. You remind me to look for another information affecting the market trends. I should learn more about it. I think I will go as what you suggest. However, these days market fluctuated a lot and we should pay attention to it. I mean offsetting you contract as soon as possible if necessary. I found a amazing website from Sean. http://www.dtnprogressivefarmer.com/dtnag/home Here I would like to share it with you!!!!
Good to see you get new source from the classmate! Also good to see you made profits. Appreciate your hard work.