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08-14-2017 04:03 PM
Back to wheat
Trader hat on now.....
Wheat is becoming a cronic victom of polio......... a month after harvest, Sept wheat could have been sold for $5.60 and cleared out the paper we were playing with it is at near an life time low of $4.37..................... in 4 weeks....
The market had given us one more profit run from that $4.78 purchase price, well above the trading range I had been playing for 10 months.
Don't ask.............why?............... we still own it......... so what happened? The farmer answer........1. got busy,a well cratered,, followed by a ten day redrill...... 2. Another pump is a mess and needed rebuilt,,,,, camera,,,,, casing gets a patch. While corn stands and waits. 3 Set up a new farm acreage....... layed new underground and sprinkler installation ..... 4... another sprinkler has a span down and needing repair. 5. A different Irrigation Motor "knocking" and gets rebuilt.
all in a couple of weeks and went from baking terrible heat to monsoon season with roads washed out......
(move on please)
Whatever the excuse ....... I got distracted and took on my farmer hat...............
So here is the other truth as to "what happened"...................
With the farmer mentality We priced all the physical wheat we raised this year in the $4.80 to $5.20 range on contract, picked up from our farm storage.... and it has started to leave. Feeling pretty good about that, I did not go back to the trader hat until this week. Complacency and the dream of a piece of pie at the Blue Creek Lodge north of South Fork, Colorado hung on through the rain........ and still lingers.....
Now I see that when we had that opportunity to price physical,,, the July18 futures was $6.20. Even with an 80 cent basis that would have been a good place to hedge 10-20% of expectations for 2018 and either live with it for a year or take profit NOW.
Points to be made.
!. Always take profit don't feel too good about being right, you may only be partially right .................... help this happen by setting a reasonable goal based on the trading range of the trend.........then Always take profit.
2. Stay focused................ opportunities are never too far away.
3 It is not farming......... it is buying and selling something.....................because you understand value.....and are not in love with the commodity.
4 Opportunity is not that far away in the age of volatility, and................ it leaves as fast as it comes.
08-15-2017 05:40 PM
What are the opportunities that will come first?
1. Feeder cattle seem to be making another run over the $1.50 area ------ if they do it has a lot of upside resistance and a good point for a sale unless news justifies more......
2 Natural gas is heading for a low of a trading range it has been testing for a while....... as we turn into a seasonal when "global cooling" is expected it looks to be a reasonable buy, The energies have taken a beating for a long time.
2. Crude oil has too many global issues to be attractive to me
3. Wheat has some interesting aspects July of 19 has been on an uptrend since it came on the board a year ago. While near term months are back to the bottom of the trading range they were locked in for a year.
Anybody ever try to offset a long term sell with a near term buy of the same commodity? Time and volatility could make both of those make sense when the carry is big....... and offset the risk....
4. Corn has some long term resistance in the $3.70 range--- Dec17. If it doesn't blow right on through it is headed back into the trading range with an uptrend that has some ?? for upside resistance. One way or another I don't think it stays here very long.
5 beans have the same long term resistance at $9.20 range --Nov 17. that resistance is reasonably strong so it will have to blow through it soon or go back up to a long term up trend that has been a gradual clime over 4 years.
Dec 19 has been on a up trend since it came on the board two years ago. Seems rediculous that anything is traded that far out but that is what you get when the casino searches for volume...... Any producers or end users involved in that first year???? I doubt it. Most producers and end users don't know if they will be in the market that far out. Specs don't care..... it's retiree money.. and time and volatility are on their side if the trade was not an extreme price....
In 1995 the last 2 years of the contract or 24 months total trading range was 40 cents...
In 2001 range was 60 cents
In 2005 the last 34 months trading range was $1.40 cents.
2006 trading range was $1.25
2007 trading range was $1.60
In 2008 the trend was up until the bank bail out and the fed started cash transfusions hoping the patient would heal the bleeding. In the last 5 months the trading range was $5.00 per bushel...... Which way did it go?
Trading ranges since have been 09--$5.60, 2010--$5.00, 2011--$ 4.60, 2012--$ 4.20--2013 $ 5.50, 2014-- $5.00. 2015 $4.80, 2016--$5.00
In 2008, 2011, 2012, and 2014 ALLLL were unbelievably volatile with the limit shown available both up and down in the same contract life...
In my opinion this illustrates what has happened to the markets.......... IMO this has driven both the producers and the users out of the market. They both tend to not take risk .... they wait because it will change.
The only thing left in the pool is speculation............ and unless they are too dumb to follow the trend,,,,,,, they can't loose....long term