For this week, I just found this useful website for sharing:

http://www.fao.org/worldfoodsituation/wfs-home/csdb/en/

This website is build by Food and Agriculture Organization of United Nations. The Cereal Supply and Demand Brief provides an up-to-date perspective of the world cereal market. The monthly brief is supplemented by a detailed assessment of cereal production as well as supply and demand conditions by country/region in the quarterly Crop Prospects and Food Situation.More in-depth analyses of world markets for cereals, as well as other major food commodities can be found here.

Paying attention to the Monthly release dates for 2012: 08 November, 06 December.

What I went right ?

Based on my last week’s analysis. The huge demand from the market would raise up the world price of crops. Therefore this week I chose to hold long positions on wheat, corn and ‘crazy crop’-soybeans before the coming of harvest time. It turned out to be a right decision, because I earned around 5000 dollars. Here is my account information:

Daily Price Change

What I did last week—Almost nothing

This week, I just did one thing-offseting all my trades and wait to see. When I found that After the release of USDA monthly report on Supply/Demand and Crop production and soybean got crazy, I realized that I was late and can not buy a short position on it. I had to wait again. However it was so tricky that when the next day I tried to bought a short position on corn after a strike, trades were close. Therefore, for this week ,I have nothing to show but a bigger loss after offsetting everything. Here is my Ending balance as of 10-12-2012,

Position Value: $0.00
Cash Available: $37773.79
Equity:         $37773.79
Realized Gains: $-2227.50

I need to figure out what I am going to trade for making up for this big loss.

The Road Ahead–Long Position

The central idea to take away from this month’s Supply/Demand and Crop Production reports is that demand is still relatively strong giving the higher prices over the last couple of months. Although because of USAD report, the soybeans turned to be a higher supply than expected and corn and wheat got short and fluctuate back, export demand for soybeans, feed and ethanol for corn, and feed for wheat. As we move though this marketing year, export demand for wheat has strong potential to pick up significantly as the short production internationally will become  more and more apparent. And also, South America is in the heart of planting what could be a record crop, so whether in the southern hemisphere will have to be monitored closely throughout our winter season.

Based on above analysis, I would buy a long position on soybeans on the month before the harvest season.

I think the I still cannot figure out how to collect useful information and make my own prediction. At the begining of this week, I checked the base change and found that wheat price started a positive change.Therefore I offset all my short positions on W2Z and W3H. Then I hope the trade will not be delayed and I can realize around $500 gains. I would like to go back to focus on original information  instead of news.

According to Wheat Outlook report from USDA, The world wheat production forecast for 2012/13 declined 4.1 million tons, driven by a major reduction for Russia. With reduced supplies, prospects for world wheat use are lower and ending stocks are projected slightly down. And also after collecting the data from Agrimoney.com, the growth rate of ending stocks for many important countries shows as following:

All over the world, the ending stocks of wheat declined. And based on the past experience, I am still looking forward to an increase in the future July and Agust contract.

References:

 1. http://www.indexmundi.com/commodities/?commodity=wheat&months=120

2. http://www.agrimoney.com/news/wheat-prices-to-top-$10-a-bushel-says-goldman–5048.html

3. http://usda01.library.cornell.edu/usda/current/WHS/WHS-09-14-2012.pdf

1. http://commodities.about.com/od/tradingstrategies/a/commodity_trade.htm

Here are some useful information on how to trade

Fundamental Anlysis—Supply and Demand

Supply–The supply of a commodity is the amount that is carried over from previous year of production and the amount that is being produced during the current year.There are many factors that can impact the supply of commodities like weather, amount of acres planted, production strikes, crop diseases and technology.

Demand–Demand for commodities is the amount that is consumed at a given price level.

There are numerous reports that are compiled by government sources – USDA, Department of Energy and the Futures Exchanges can be used as a source to carry out fundamental analysis.

2. http://www.uswheat.org/reports/harvest

U.S. Wheat Associates reports on the condition of America’s wheat crop every Friday through the harvest season (June – October). The reports includes updates for Hard Red Winter, Soft Red Winter, Hard Red Spring, White, and Durum.

3. http://www.spectrumcommodities.com/education/calendar/index.html

If you want to check the basic information on crops such as different crops harvest seasons on different regions, production and consumption, the largest exporters and importers and so on. Charts on this website represent production stages for different crops around the globe and you can check any month you want.

What went wrong for Third Round?

Last week, because of the Friday stock report, the price of wheat saw a quick strike. I have read that “under a range trading strategy, you would sell the market when it gets to the top of its range and buy the market when it gets to the bottom of its range”. I guessed that after a fast increase, the wheat price would welcome a downward trend in short term. However, the situation of short stock of wheat would rise up the future price especially before another harvest coming. Therefore I hold a short position on December contract and a long position on March contract. I just followed the news as well as price change on the website of GMEGroup. However, I ignored the most important thing, backing to fundamental analysis of commodities—the supply and demand of wheat. From above chart, we can see that wheat future price showed a downward trend, but with a little bit change. Therefore the base for W2Z and W3H are so low that there was not a large gain or loss on my account. Until, Oct.6^th, there was a relative big jump. I am still looking forward to a big increase in March price. Because the farmers expect a higher price due to recent short stocks, then I guess that after experiencing a harvest in Australia and South Asia, farmers would increased stocks to raise up the price. However, the price on September just saw a big jump. Therefore it is too hard to say that the price would go father in March. Also I made another mistake, I offset my long position on W3H from Saturday, however, the trading system delayed that proposal. I lost the good opportunity to lower my loss.

Basic Knowledge on Soybeans

Cool Source of Information 

Sep. 24, 2012

http://www.bloomberg.com/news/2012-09-24/corn-soybean-harvests-accelerate-on-dry-u-s-midwest-weather.html

From this website, we can find latest news about agriculture commodities.

Sep. 25, 2012

http://www.reuters.com/article/2012/09/25/markets-grains-idUSL4E8KP4JC20120925

What did it say?

1. Earlier harvest on dry U.S. Midwest Weather. (The soybean harvest may be 14 percent smaller at 2.634 billion bushels.)

2. “The vast majority of farmers are looking to sell soybeans right out of the field to take advantage of record prices at harvest.”

3. “Soybeans are falling on fears of less Chinese demand for U.S. supplies,” said Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago. “Economic growth is slowing more than expected in China.”

4. A weaker dollar—EQ3

The expectations that U.S. supplies will be tight in the months to come.

Advancing Midwest harvest and good yieds”Farmers are going to hold on to their beans, and it could get tight between now and February,” said Gerry Gidel, chief feedgrain analyst at Rice Dairy LLC in Chicago.

5. U.S. soybeans ended marginally higher on Tuesday after a seesaw session, which saw talk of end-user demand and a weaker dollar lend support though gains were limited by an advancing Midwest harvest and accounts of good yields.

What can I get?

The supply of soybean will increase, and the instant supply of soybeans increase a lot and the price maybe go down in the short term.

Because China is one of the largest importer countries of soybeans, the worldwide demand for soybeans may be less, which would lead to the decrease of price.

And the weaker dollar will boost the purchase abilities of other countries. Thereby the demands of importer countries will be more.  At the same time, positive outcome of harvest encourage farmers to hold on their beans for higher price in the future.

For this week, I checked the price change on GMEGroup.com by minutes and found that the future contract price of soybeans dropped gradually.

My reaction:

At first I offset all of my trades before, Because this week I just want to focus on I checked Gulsana’s blog and she said that she believed that holding a long position on soybeans is a right choice for this week. However, based on above analysis, I think, in the short term, the price will go down but may go up very soon. Therefore I decided to buy a short position on S3F and monitored the price change every couple of minutes.

Continue reading →

1. What Went Wrong?

2. The Road Ahead

1. What Went Wrong?

First here is my conclusion about my last week’s trade:

Because USA is one of largest exporters in the world, therefore the affect of production of wheat can be very significant. Recently, the most severe and extensive drought in at least 25 years is seriously affecting U.S. agriculture, with impacts on the crop sectors with the potential to affect worldwide food price. Wheat is widely produced across much of the drought-affected area of the Midwest, but most of the wheat in this region is harvested in the spring and early summer, so it reached maturity before the dry conditions happened. According to the data from United States Department of Agriculture, wheat prices are projected at $7.50-$8.70 per bushel in 2012/13, up from $7.24 in 2011/12, due to higher corn prices and stronger export demand resulting from reduced foreign wheat production. Therefore I bought long on December’s wheat future contract, at the end of the fist week, because of this contract I earn as followings:

Holding 1 – long on W2Z                  mark to market

price in:       883.00

today’s price:  924.25

committed:      $2025.00

gain/loss:      $2062.50

Holding 2 – short on C4U                  mark to market

price in:       613.75

today’s price:  619.75

committed:      $1380.00

gain/loss:      $-300.00

Ending balance as of 09-14-2012,

Position Value: $5167.50

Cash Available: $36594.30

Equity:         $41761.80

Realized Gains: $0.00

However, from the next week, the price of wheat started to fluctuate and I was panic about the wheat price, with falling from $883 to $863.50 (As figure 1 shows). I lost $975 on that contract. So when it started to go up, I chose to offset this contract on Sep. 20. Because of this action, there is a realized loss of $-326.However, today I check the future price of wheat from CMEGroup website, it shows that:

However, I cannot figure out how does it work and what affects the wheat price all the time?

I went short on corn future contract for 2014 sep.Corn around the world have their own unique production cycles of planting and harvest timeframes. Below are the some data from http://commodities.about.com/od/researchcommodities/a/corn-seasons.htm “United States (39 percent of world production) 
Planting: Corn crops are planted beginning in April and last into June. 
Harvest: Corn is mainly harvested in October and is finished by the end of November. China (21 percent of world production) 
Planting: Corn is planted in mid-March through early June. 
Harvest: August through October. European Union (8 percent of world production) 
Planting: Mid-April through early June. Harvest: Mid-August through late October.” Therefore, although now the drought affects the production of corn and rose up the price. However, in 2014, during the harvest season, the price of corn will go down as usual. I chose Sep. 2014 future contract for corn.

In addition,  I worked a wrong one and went with Soybean meal. I made a mistake and lost a lot of money on it. I thought the price of soybean meal would go up because of the drought, however, it always went down. I didn’t contribute a lot research on this. Now I checked the data from CMEGroup website:

The road ahead

Last week’s experience is my first try and I began to learn how to collect information from different resource. I follow many related groups on twitter such as CMEGroup, WorldTradeNews, IndexMundi and etc. For next week, I think I will tale a long buy on soybeans. According to the anticipation from United States Department of Agriculture, prices for soybean products continue to be projected at high levels for the 2012/13 year. Soybean oil prices are projected at 54-58 cents per pound, up from an estimated 52 cents per pound for the 2011/12 marketing year, while soybean meal prices are projected at $485-$515 per short ton, up from an estimated $397 per ton for the 2011/12 marketing year. Forecasts hardened for rains in central Brazil where moisture is badly needed to get the sowing season off to a good start, after dryness, which in some areas has lasted for some 120 days. This will reduce the supply of soybeans in the future.

I think during next week, I need to learn how to collect different data and how to interpret these data. I need to spend more time on following news and reading related articles. Also, classmates are good teachers for me to enrich my knowledge. I checked many of classmates’ blog and I learned more from their analysis.

The Alberta Federation of Labour says the Enbridge pipeline project will actually eliminate Canadian jobs”:
http://www.cbc.ca/asithappens/episode/2012/09/04/the‐tuesday‐edition‐45/

The Alberta Federation of Labour has two main criticisms of the Northern Gateway pipeline: (1) Canadian jobs would be created if the crude bitumen was refined in Canada and then exported rather than being exported directly; and (2) The pipeline will reduce the “Asian” premium, which means a higher price of oil in Canada and job loss due to the higher processing costs for Canadian refineries.

In about 200 words carefully explain why the creation of the Gateway pipeline from Alberta to Kitimat BC will raise the price of crude oil for Canadian refineries.

The Enbridge Northern Gateway Pipelines Project is a proposal to construct twin pipeline running from Bruderheim, Alberta, toKitimat, British Columbia. The eastbound pipeline would import natural gas condensate and the westbound pipeline would export bitumen from the Athabasca oil sands diluted with the condensate to the new marine terminal in Kitimat where it would be transported to Asian markets by oil tankers.

In Asia, especially in China, the price for oil is a little higher than in North America. There are some reasons for that. For example, Chinese refineries are willing to pay more for bitumen products because they have a secure supply from their multi-billion-dollar investments in the oil sands, and in part because they they pay very low royalties and taxes in Alberta. The construction of Northern Gateway pipeline would increase the chance of exporting crude oil from Alberta to Asia for pursuing ‘Asian Premium’. Consequently, the oil supply in Canada becomes more scarce due to large amounts of exports.Therefore the decrease of domestic supply of crude oil would lead to the increase of pice in Canadian market.

In addition, the higher price of crude oil for Canadian refineries may result from the high cost of transportation, according to Texas-based energy consultant Muse Stancil, which means that ”Northern Gateway allows the Canadian crude producers to both stop selling to their least attractive refiner clients (from a pricing prospective) and reduces their need to ship heavy crude via comparatively expensive rail transport.”

References:

1.  http://www.cbc.ca/m/touch/canada/story/2012/09/06/pol-cp-gateway-hearings-dutch-disease.html

2. http://en.wikipedia.org/wiki/Enbridge_Northern_Gateway_Pipelines

3. PDF from http://www.google.ca/search?client=safari&rls=en&q=northern+gateway+pipeline&ie=UTF-8&oe=UTF-8&redir_esc=&ei=g89OUNC8CabYigKdxIDQAw#q=northern+gateway+pipeline+canadian+refineries&hl=en&client=safari&rls=en&prmd=imvnsu&ei=-NFOUMjtCoTYigK7t4E4&start=10&sa=N&bav=on.2,or.r_gc.r_pw.r_qf.&fp=483643ae6a913172&biw=1247&bih=628

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