We came back from a long weekend and found out that Greece had decided to vote no on their referendum involving how they were going to pay back their financial obligations. Global stock markets fell sharply on Monday and Tuesday and have rebounded slightly near Tuesday’s close. The commodity markets have finally started to pick up volatility and we are coming to a point where we should experience more participation in all the grain markets because uneasiness prevails in the grains due to weather and its impact on future yields. We are starting to see small specs and hedgers move away from the short side because the funds have vacated their shorts and are starting to build long positions especially in the beans.
Let’s look at the numbers: The June 30th Commitment of Traders report showed Non commercial traders net long 111, 175 contracts, an increase of 154K contracts which represents a change from a net short to net long position. The commercials were net short 8700 contracts, an increase of 135K contracts which represents a change from a net long to a net short position. Non commercial and non reportable combined traders held a net long of 8,764 contracts. These traders shifted from a net short position of 126K contracts last week. Commodity index traders held a net long position of 341,492 contracts, up a significant 34K contracts in just one week. In the 13 Ag markets overall, index funds increased their net long position by 114,777 contracts in just one week. The previous record high buying one week was 84,500 contracts.
Weather will be the dominant pricing influence going forward with forecasts for the latter half of the month calling for warming temperatures and a drying out in key areas in the majority of the corn growing areas. We shall see. It is my contention that both the producer and speculator should be positioned on both sides of the market going forward. One way to conservatively do this is with an options strangle. I would propose buying the September Corn 380 put and buying the September Corn 460 call for a total price of 10 cents, or in cash value $500.00. The risk on the trade is the price paid for the options plus all commissions and fees.
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 pm central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup. Sign Up Now
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
