Inside Futures: Relevant trading-focused information authored by key players in the futures, options and forex industries

To refrain from guessing why grain markets closed higher the day of the USDA report, July 11th, I will let the dust settle and over the weekend, when there is time to break down 40 pages of information. I will have a report Monday July 15th based on the full facts versus a knee jerk reaction.

However, the rally after the USDA report may have more to do with a weak and falling US Dollar for the past two days than what now looks bearish based on the report.

To say commodity markets have been volatile is almost an understatement. The grain markets are a yo-yo. Thursday, after the World Supply and Demand Report was a good example. Grains after the report were lower, then higher, with corn moving lower a second time and finally finished higher. Why? In the commodity industry guarantees are something that should never be done, but I can guarantee over the next few days, there will be all sorts of reasons given for the volatility.

Whether you are speculating, or hedging and if you are using fundamental supply and demand information with the hundreds of reports released every day, it can be terribly confusing. Because commodities are a zero sum market, every buyer has a seller and every seller a buyer, reports have on any given day just as many bullish reports as there are bearish. Below are a few different reports just for example I picked from daily alerts I receive on Russian wheat. Over the following week there will be plenty of reports on the WASDE Report that have differing views.

July 3rd

Russia’s Grain Yield May Drop on Insufficient Rains This Month
Bloomberg

Razgulay Says Favorable Weather Means Its Grain Crops on Target
Bloomberg

July 9th

Russia’s wheat prices fall despite concerns over drought
Business Recorder

Wheat price surges: NAB
The Land Newspaper

July 11th

Russian Port Seen Shipping Biggest Monthly Total So Far in 2013
Bloomberg

Russia: 2013 wheat production revised down to 52.4 mln
UkrAgroConsult

As you can see, each day there are different reports that have differing views. So how do you decide what report you want to use? After all, using one report over the other may make a trader several thousand dollars, or may lose a trader several thousand dollars. Common Sense Approach

When reading any report, it is necessary to use common sense. Don’t go making news or a report something to fit how you want a market to move, or how a reporter wants to convince you what the market direction may be. In other words, make sure what you read can be verified.

Also don’t fight the facts. How many times have you heard, “I don’t believe how the USDA could come up with that junk? It can’t be right.” USDA reports are as good as the information sent back on surveys. They query a large sample of various people and groups for all reports. Above all, it is the information the entire world will use.

Over the next few weeks, reports of all kind will surface about weather and crop conditions. As you see from the headlines above and the reports that go with them, the number of commentaries coming out about US grains and the effect of weather will be as varied and numerous as there are stars in the sky. Be honest with yourself when making decisions. Don’t go wishing on stars hoping markets go your way.

Look for my complete breakdown of the latest USDA report on Monday July 15th. If you have questions concerning the report, please let me know. 312 242 7740 or chris.lehner@archerfinancials.com.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

KS