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Commentary
The Trade expected little from the USDA in today's WASDE report and received it. It all revolved around exports and US feed demand. The USDA made it a point to say that global soybean import demand is nearly unchanged from last month, despite the request to China from the President last week to “consider” another 8 million metric tons (243 million bushels) of US bean exports into China for the 25/26 crop year. USDA said the following regarding their decision to leave ending stocks unchanged. USDA states China is reported to be considering buying more US soybeans. Global soybeans import demand is left unchanged from last month, therefore if China bought more from the US, global soybean exports will likely be shifted with me the shipments to China and less to other markets. In my view it’s just a transfer of export demand increasing US bean sales into China while non-China buying is secured more from Brazil than the USA. It will be interesting to see if beans can hold here. Funds are long over 100K again amid a Brazilian bean harvest that is well underway with a record crop coming. Caution is warranted at these price levels in my view if one is long. Look to buy cheap puts in May beans near the 10.60/10.70 area. Should we pull back or retreat from current levels I look for May soybean prices to revert back to where they came from prior to the Trump comments last week. Trade idea below.
Trade Idea
Futures-N/A
Options-Buy the May Soybean 1070 puts for 7 cents OB.
Risk/Reward
Futures-N/A
Options-The maximum risk on the trade is $350 plus commissions and fees. The chart is in a near term uptrend but could turn quickly on harvest pressure and the potential that nothing evident emerges on additional old crop bean demand from China. Risk 5 cents or $250 from entry and offer to exit the option at 30 cents, for a 23 cent gain less commissions and fees.
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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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.
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