Decision I made this week, wrong judgment again?
Piles of assignments made me have no eyes to keep focusing on the trading game, though I did try to focus on. I have made a little bit trade, as you can see in the following graph. I longed 2 units of corn at the price of 4.38, and the limited order I set last week came into effect on Friday morning (when I was still enjoying my lazy bedtime), which won me a little profit by shorting-and- covering soybeans.
But What made me shocked was the down-side trend of corn happened just the time period when I was sleeping in the shining Friday morning, my return fell down to only negative 6.9% !
Oh My Corn!
Starting from September when the trading game was kicked off, the price of corns continued its trend of steadily decline. And as a new-hand, I always responded to the shock of market quickly. The orange notes can tell you all the decision points I’ve made up to now. I seem to be highly elastic with the respect of the price changes. In a long-run perspective, all the price points I bid were just like one stop of a long-distance journey, and the difference between them is that you’ll surely know your destination on your journey while you can never predict accurately where the price will go in the future market.
Although I have made my determination last week that I would not be interfered by the media voices of the commodity market, I was still curious about why the corn price declined this time. The news just told me that diminished ethanol demand undercut corn prices again overnight. If it’s really the story, what happened in corn market should also occur to the soybeans market, because both of them are the major raw materials for ethanol.
What about Soybean?
There seems to be a little shock to the soybeans market. Maybe the diminished demand was just part of the reasons why price declined. Soybean has been maintaining the most leading role in the US export market, accounting for nearly 17.5% share of US export in 2012. Though the total grain and feed export was down sharply last year, but soybean export soared and is likely to continue its growth in the future year. Its growth may have some connections to the increasing demand of biofuel, but it was not the whole picture.
Considering that the continuous drought in US, we can see that the US supply of soybeans was not stable enough. Even though US can’t do a good job of supplying enough soybeans or other agricultural commodities, other countries like Brazil can fill the gap in the world market and took over part of the supply missions. Brazil sent more ethanol to the US than what it bought from it (3 times more in value and volume), meanwhile its imports fell down by some 50%. (Do you remember the assignment#2, question 9? If the supply of exporter decreased, the former importer will change into exporter, while the exporter like US may become importer.) This kind of global trading can definitely release US some pressures caused by decreasing production of biofuel feed.
Tired, but still have to trade!
Before Friday morning, market seemed to be quiet and peaceful though we all have very tough and busy week days. I still have to keep learning and trading (there’s only 2 or 3 weeks left!) no matter how wrong the decisions turned out to be.
Good luck, everyone~ No only in the game, but also in your following mid-term!!
Vanilla