Grain Spreads: New Crop Hedge Ideas

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

Is it too early to talk about new crop hedges for corn and beans in late April? The answer is sometimes. I’ve seen new crop highs being made in the first or early second fiscal quarter of a calendar year well before planting or key yield development time periods. The recent conflict with Iran has added in additional fund length in the grain complex led by bean oil of all commodities. Managed Money net long the whole grain complex close to 700K contracts of futures and options, with bean oil record long in the managed money category. There is a lot of meat on this bone should energy prices moderate nearer term while weather and its impact on future yields doesn’t become an issue over Summer. {See crop years 2024,2025). It wouldn’t be unwise in my view to at least consider a small percentage hedge of one’s production. On a 5 to 10 percent of future production, one can lock in 11.50 in beans until late December, using January 2027 options. In corn one can lock in $5.00 March 2027, which expires late February. Examples below. 

March 27 Corn

Buy the 5.00 puts.

Sell the 4.40/5.00 March 27 call spread.

ZCH27C500:P500:C440[3C]

Cost to entry, even money less commissions and fees.  

Maximum risk is 3k per spread, plus trade costs and fees. That would be realized if March 27 futures settled over 5.00 in late February 2027 on option expiration. 

Margin per spread-$1203.00 

January 27 Soybeans

Buy the January 2027 11.50 puts.

Sell the January 2027, 10.50/11.50, call spread.

ZSF27C1150:P1150:C1050[3C]

Once collects 20 cents or 1K less trade costs and entry. 

Maximum risk is 4k per spread plus trade costs and fees. That would be realized if the underlying futures contract settles above 11.50 on 12/24/26. 

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

slusk@walshtrading.com

www.walshtrading.com

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.