Crop Report Gameplan
Please join me for a free grain webinar every Thursday at 3pm Central. We discuss supply, demand, weather, and the charts Sign Up Now
Commentary
The fact that the USDA didn’t raise corn yield above 180 BPA for kept funds from unloading their near record long. Yield seen at 178.5. The same can’t be said for beans as ending stocks are above 300 million at 310 while yield is just shy of 53 BPA. Neutral to friendly corn, bearish beans, and for now bearish vs expectations for wheat. In the last two weeks, funds have established record longs in corn, beans, and bean meal. With two wars escalating in commodity rich areas in the Black Sea, and Strait of Hormuz, buy and hold and buy the dips in both food and energy became a predictable position in my view. Now we have our number one commodity buyer coming to DC in two weeks, China. We could see some further announcements ahead of the Premier’s visit in regard to additional purchases of US Ag products or no new purchases at all. China has been buying US beans for future shipment at a rapid pace this crop season, and it’s the demand side, not the supply side in my view that has beans in the teens. Demand along with the aforementioned two major wars that continue to rage. In normal times, if I saw the funds long near one million AG contracts a few weeks from harvest, I would be sharpening the knives to get short using options. This year is different on many fronts that I just laid out. Looking at ending stocks, at 1.5 billion for corn, a $5 handle is warranted for corn in my view, amid near record demand sans China. Beans balance sheet doesn’t warrant a 13 handle in my view with ending stocks above 300 million. However, the elephant is entering the room and it is China. Do they keep their word on the 25 MMT purchases this marketing year? So far, I think they have booked 60% of that total for future shipment. We are only 11 days into the new marketing year. Has the USDA accounted for all of this potential demand on the balance sheet? They did increase demand by 25 million bushels in today’s report, but that’s a drop in the bucket of what could be forthcoming in the months ahead. I think option strangles are the best way to play here moving forward amid all the uncertainty, which translates to picking positions on both sides of the market. Trade ideas below that put a floor at 5.30 corn and 13.00 beans.
Corn
Sell the July 2027, 610/550, put spread (Bull)
Buy the January 2027 530 puts (Bear)
Collect 24 cents or 1K upon entry less commissions and fees.
Max risk is 36 cents or $1800 plus trade costs and fees.
Margin: $584 per spread.
Beans
Sell the Sep 2027, 1440/1340, put spread for 80 cents. (Bull)
Buy the January 13.00 puts for 40 cents. (Bear)
Collect 40 cents or 2K upon entry less commissions and fees.
Maximum risk is 60 cents or 3K per spread plus trade costs and fees.
Margin -$1484
If you would like to receive more information on the commodity markets, please use the link to join our email list Sign Up Now
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
311 S Wacker Drive Suite 540
Chicago, Il 60606
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.