The Ted Spread

How Good Could a Deal be for Soybeans?

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Trade talk is center stage this week with after a two-day visit from the Chinese trade delegation. As usual there were many conflicting news flashes this time followed by a wild White House press conference. The take away seems to be that there are still some significant details to be worked out, but significant progress has been made. If we get a deal how good could it be for soybeans?

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To my ears the news coming from the trade negotiations has been increasingly positive. Of course, there is the obligatory "but there is still work to be done" and "We will increase tariffs if there is no deal" but that is seemingly a big part of Trump's negotiation process. From a standpoint of IP and IT and enforcement there of it sounds to me like we are very close to an agreement.

If so, China has seemed to be very willing to throw a lot of money into a deal to get trade moving again. Lots of numbers have been tossed around but the latest was 1 Trillion over 6 years and 50 Billion in Ag commodities over the next 2 years. If this is in fact part of the details of a deal it could be a game changer for the soybean market. But with slowing soybean demand (at least partially due to ASF) would China want to buy massive amounts of soybeans?

The more I think about it the more I really believe it would be very smart of China to buy a huge amount of US soybeans to put into state reserves. China never imagined Trump would be elected President, let alone live up to his campaign promises if he did. China got caught off guard this time. So, wouldn't it make sense for them to build a strategic soybean reserve so they are insulated from something like this happening again? Let's say stockpile 50mmt of soybeans over the course of the next 3 years? A big chunk of that could come up front to seal the deal and could potentially cut soybean ending stocks from 1 billion down to more normal (or dare I say tight) levels...

Food for thought

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Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action.  Ted Seifried - (312) 277-0113.  Also, feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.  Find me on twitter - @thetedspread 

 

March Soybean Daily Chart:

  

Producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.