Grains Journal

I am finding grains hard to analyze with my current tool I use for forex and es. How have you changed your strategy to sell the Grains. Wheat seems like it is in no mans land and could go either way.

Regards
Steve

 

I think the agriculture markets have been acting funny lately, long only index funds are entering the market in force since the CBOT raised position limits recently. Commodity fund managers also like grains because reletive to other assets they are historicaly and comparably cheap. The fundamentals for soft wheat, corn, soybeans, and oats are pretty bearish. I trade off fundamentals mostly and am having trouble making sense of this market action.

 

One thing about grains-- they have a tendency to revert to normal prices during a year's time. This is because the crops are renewed each year and producers can switch acreage etc. This is totally unlike other physical commodities like oil that need a lot of infrastructure to make a difference in the market. This is in part why oil will continue moving upwards with many dips along the way. By the way, there are other agricultural commodities that take a while to get back to normal. These would include OJ and Coffee where it takes quite a while to develop new groves and trees etc to increase the supply. Grains are not that way. I like the grains play due to the yearly seasonality of prices. I will be shortly entering the Long 4th of July Beans, Short Thanksgiving Beans spread and I'll hold that (and add to it), into May, when I will look to reverse this and go the other way.

With regards to the TA question, I use exactly the same tools for these markets as well

 

looks like a bit of a downturn in the overnight CBOT Wheat session.

 

I am currently short march oats at 189, I will be getting a margin call at 198.50. The fundamentals for oats are horrible right now but corn buying seems to keep pulling it up. Canada has large oat stocks right now, and will be planting a huge amount of oats for the 06/07 marketing year.

 

johnny, how many contracts are you short?

 

Short 3 March and 2 May

 

If I could offer just a bit of advice--I think you are trading too big for your account size. This will be ok if your trading account is juat a small portion of your portfolio. However, I think you would be better served to enter one contract and perhaps add another on at a higher price. Just curious, what are the entries on the March and the May

 

189 is about my average entry for both contracts.

 

Can you explain to me why the soy bean spread works like that? Is it harvest related?