Grain spreads: The Case for Wheat
Please join me for a free grain webinar every Thursday at 3pm Central. We discuss supply, demand, weather, and the charts. Sign Up Now
The wheat market finished the week in a tight side -ways chop the last two sessions, after the steep drop the 1st half of the week. The market is struggling to bounce with beneficial rains headed for the southwest Plains over the next week, harvest picking up in Argentina and Australia and the prospects of Black Sea peace talks providing a notable bearish cloud over the market. However, Russia hit several Ukraine energy facilities on Thursday, and attacks are likely to continue right up until there is an announcement that trilateral talks are starting. Weekly charts continue to sour as markets concluded their eight consecutive weeks of losses. December 2026 KC wheat led the complex lower with losses of 39 cents on a 47.50 cent trading range. Values now trading to their lowest levels since early July with next support at $6.44 to $6.36. December Chicago wheat 2026 saw a 45-cent trading range with losses of 35 cents with $6.10 to and $6.08 next downside targets. MWZ26 had a 40.50 cent trading range with losses of 33.50 cents with support not seen until $6.25. Funds continue to add to shorts and liquidate longs until they are given a reason to do otherwise. COT report showed funds selling -20k in Chicago and -10k in the last COT report. Managed funds are now short over 51K in Chicago wheat. Wheat has now finished lower for 8 straight weeks, its highest weekly losing streak since 1997. With all that being said, I think it’s a buy as I don’t see either conflict ending soon and the Black Sea out of commission for a long while. Consider the following trade as this market is oversold while both wars potentially escalating.
Trade Idea
Buy the July 27 Chicago wheat 8.00/9.00 call spread, while selling the July 27 Chicago wheat 9.00/8.00 put spread. Bid the spread at a negative -85 cent collection.
ZWN27C800:900: P800:900[1-1+1-1]
Margin -$561 per spread
Risk-Maximum risk at expiration next June is 15 cents or $750 per spread plus commissions and fees. If filled at an 85-cent collection, we will risk 10 cents on a GTC stop loss, rising approximately $500 plus trade costs and fees. We feel that July 27 will trade to a retracement level near 7.50/7.70, should that occur in the weeks to come, look to exit the spread at positive -30 cents, for a gain of 55 cents less trade costs and fees.
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.