February WASDE
As expected, it was a quiet report for the grains, especially compared to the January report. No changes were made to the domestic balance sheet for soybeans, but the estimate for Brazil’s soybean production was raised 2.0 mt to 180.0 mt. Global soybean ending stocks were raised 1.1 mt to 125.51 mt. Corn exports were raised 100 mb to 3,300 bb, which brought ending stocks to 2.227 bb to 2.127 bb. Global corn ending stocks were lowered 1.93 mt to 288.98 mt.
Soybeans
President Trump’s mention of additional Chinese purchases on February 4 rallied the market as high as 1169 ½. Volume in March soybeans last Wednesday was the highest in 10 years. China is considering an additional 8 mt in purchases after already completing the 12 mt target. There was a flash sale of 264k mt for delivery to China on Monday. CONAB estimates will be released tomorrow, the average estimate is 179.5 mt. Despite the gigantic volume and strong charts on all chart timeframes, I’m not convinced there will another leg higher from here. Brazil’s soybeans can be bought at a significant discount to US soybeans, and Brazil is harvesting a record crop ahead of schedule. China already made a political move to buy US soybeans at a premium. It seems more likely to see China buy from South America and increase purchases again from the US at a lower price later in the year. I believe this is a second chance to hedge your soybeans, or catch a break in the market with a protected options strategy.
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Corn
Corn was moving steadily higher prior to the January report but struggled to hold its gains much beyond 450. The sell-off immediately following the report broke the chart, and corn has been stuck in the mud ever since. Export demand has been solid and should remain that way, especially if price falls. Until conditions change, upside and downside are limited in my view. I like selling a straddle with a range of 476 ¼ - 403 ¾ in the July contract.
Trades to Consider:
JULY ’26 SOYBEANS
1145 ¼ at the time of writing
SELL 1 JULY’26 1250 CALL 15 ¼
BUY 1 JULY’26 1350 CALL 6 1/8
BUY 1 JULY’26 1080 PUT 16 5/8
SELL 1 JULY’26 1030 PUT 5 ¾
PRICE: 1 ¾
COST: $87.50/TRADE PACKAGE, PLUS FEES AND COMMISSIONS.
JULY’26 SOYBEAN OPTIONS EXPIRE 6/26/26 (135 DAYS)
MAXIMUM LOSS: LIMITED
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JULY ’26 CORN
444 ¾ at the time of writing
SELL 1 JULY’26 440 CALL 20 1/8
SELL 1 JULY’26 440 PUT 16 1/8
PRICE: 36 ¼ CREDIT
COST: $1,812.50 CREDIT/TRADE PACKAGE, PLUS FEES AND COMMISSIONS.
JULY’26 CORN OPTIONS EXPIRE 6/26/26 (135 DAYS)
MAXIMUM LOSS: UNLIMITED
If July ’26 Corn Expires within the straddle range, you would collect all of the premium sold, 36 ¼ cents or $1,812.50/Trade Package, Plus Fees and Commissions. If the July ’26 Corn Futures are above the top of the straddle range or below the bottom of the straddle range, you would be losing on the trade. You could exit the whole trade if it was approaching the top or bottom of the range, without too much damage. This is a time decay/range bound trade.
The link below is to my bullish article on Soybean Oil, written December 17. Soybean Oil has rallied hard since then. I still like it going forward. Contact me for trades in Soybean Oil.
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Hans Schmit
Broker, Pure Hedge Division
312-765-7311
hschmit@walshtrading.com
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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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