What I went right?

Last week, I was busy preparing a presentation for another course, therefore I didn’t spare time for my blog. At the same time, I missed the opportunity of latest released report. Unfortunately, I went six long positions, which resulted in a big loss and I couldn’t get out of this bad situation. Until now, I am still looking forward to another chance to gain my money back.

On Nov. 9^th, 2012, USDA released the supply & demand report on three commodities: soybeans, corn and wheat. According to this report, US soybean production was 80 million above trade expectations and “ the jump in world ending stocks is a significant concern. As for corn, USDA pegged 2012/13 corn production at 10.725 billion bushels which was 91 million above expectations. However, all world wheat production was experiencing a downward trend, about 1.5 million from the October estimate. However, wheat and soybean are substitutes, the same trend for these days are common.

Daily Price Change

 The Road Ahead:

These days I For next week, I will focus on how to use technical analysis to forecast price. The technical analyst focuses purely on market information, but also volume and open interest figures.

Soybean:

From this chart, we can see that from August to now, there is a sign of inversed head and shoulder (Top). This involved three phases-the formation of the left shoulder, the head, the right shoulder. Therefore, I think there will be a upward trend in Nov. 14^th contract.

                         Left shoulder              Head Right                     shoulder

And also the above analysis can be confirmed by moving average analysis. Here are three moving average lines, which based on different year range. The most basic way to trade using just the moving average is to buy when the price of a commodity breaks above the moving average line.

Corn:

In recent days, the corn price fluctuates a lot. I cannot find any specific signs for future trend. Therefore it is hard to predict. Based on the former experience, in October, there was a similar slump and then back to the former level and then stayed stable for a while. Therefore I guess in the next few days, there will be an increase in price.

Wheat:

As for wheat, the price reached to the top in Nov and then showed a downward trend. At the same time, the open interest and volume is relatively high when compared with last few months, which shows a strength behind the downward trend. Therefore I think the July, 2014 trend will continue.

And from the moving average lines, we can see that the price of the moving average breaks below the moving average line, so sell the contract.

References:

http://www.agrimoney.com/futures.php?page=chart&sym=ZCN14

http://futures.tradingcharts.com

Cool Resources:

Cool Resources:

http://www.forexpros.com

This website is really cool for finding commodities news, charts, technical analysis and so on. Especially this website has weekly outlook of Grain futures, which can give you some information on how to move on for next week.

I am looking forward to more feasible resource to help me with my technical analysis.

The Road Ahead

About Exchange Rate:

Last week, I got some suggestions from Araza, he asked me whether exchange rate has a significant effect on world price of crops. Therefore this week I have a look at it.

A stronger US dollar reduces the competitiveness of dollar-denominated exports such as many commodities by making them less affordable to buyers in other currencies. Therefore the demand of consumers from exporting countries will be less, which would increase the price of crops. According to Agrimoney.co, Chicago’s November soybeans fell 2.0% to $15.27 a bushel, with the better-traded January contract showing a 2.2% fall to $15.26 ¾ a bushel. At the same time, December corn fell by 1.4% to 7.39 ½ a bushel, while December wheat eased 0.2%, to $8.64 ½ a bushel.

About Production prospects:

1. Weather: The worst crop conditions have forced some farmers to reseed the wheat, which reveals a worst start since records began.

In other areas, the downgrades follow a further period of weather extremes, following last season’s drought, which has landed much of Argentina and southern Brazil with excessive rain, while leaving many central and northern parts of Brazil with too little moisture.

The heavy rainfall delayed plantings of soybeans with data showing that farmers have planted only 3.6% of expected hectares. This situation also happened on corn seedings.

1. Policy: Russia decided to remain open to grain exports despite a poor harvest this year. First, it means that the country may have some more supplies to ship this season. Secondly, this policy encourages Russian farmers to raise sowings of winter crops and spend more on the crop. Russia is propping up domestic supplies, and keeping prices somewhat in check, by releasing grain from state reserves.

Conversely, in Ukraine farmers will likely reduce winter plantings, because of the uncertainty sown by official statements on curbs, culminating last week in the country’s farm minister confirming a ban while the prime minister’s office denied a decision had been made.

Based on above analysis, the price of wheat is hard to estimate. I think the above information is not enough for me to make my guess. Therefore, I will follow Andrew’s step to learn some basics of technical analysis. Besides, this week I will pay attention to the report release date:

1. Supply and Demand Report will be release on Nov. 8^th
2. The USDA was scheduled to release its updated crop estimates on November 9^th

And According to the data from Forexpros.com, “market players should focus on the USDA’s weekly crop progress report on Monday as well as Thursday’s weekly exports data and Friday’s updated Supply and Demand Report.”

References:

http://www.agrimoney.com/feature/ag-investors-brace-for-controversy-as-us-stocks-data-loom–170.html

http://www.forexpros.com/news/commodities-news/grain-futures—weekly-outlook:-november-5—9-240264

What I went right?

For this week, based on my last week’s analysis. The tight wheat stocks of major exports and the negative prospect of corn will lead to a higher price. Therefore I chose long positions on future contact of wheat and corn. At first I got the knowledge that soybean productions will raise. However, I got some feedbacks of my blog from Vicky and Araza. They suggested me to do some other researches such as exchange rates and acknowledged me that China as one of biggest exporter of soybeans will increase its imports. Therefore I changed my choice. The depreciation of US currency would encourage other countries to import more crops, which create more demand. Therefore I bought a 2014 July contract on soybeans. Here are my trading information and daily price change of crops.

Daily Price Change