Grain Spreads: Headline Driven

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Commentary

Soybean prices surged following yesterday’s announcement from the U.S. Trade representative that said, “China will purchase at least $17 billion per year of U.S. agricultural products in 2026 (prorated), 2027, and 2028, in addition to the soybean purchase commitments that it made in October 2025.” Algos ripped higher as it is assumed the US balance sheet will tighten if China follows through with the AG purchases that are being quoted here. The potential also exists that the lowering of the 10% tariff by both sides could put beans in a more competitive position to compete with South America. Bean oil was extremely strong today and meal higher as well. Us planting came in at 67 percent planted vs the 5 year average at 53 percent. China has yet to confirm that they have committed to buy aby specific amount of each US Ag product, but the rhetoric seems friendly, and it seems the Chinese will be vague enough to know to have wiggle room down the road. The bulk of the 25 million metric tons promised in October most likely won’t be secured until harvest or beyond as new Argentinean supplies come online currently. Market is really going to hypersensitive to weather this year with the new crop carryout at 300 million bushels if there’s weather issues. While there is a good chance we could see an increase in harvested acres for beans this year due to a myriad of factors, increased crush amid higher energy costs plus a potential weather hiccup, we could see new crop beans trade to 13.00 quickly in my opinion. Conversely, we could and increase in acres followed by a El Nino Summer (cool, wet Midwest) and the market goes back to where it came from at 10.50. Not staying here at 12.00 in the long run. Option Strangle below. 

Trade Ideas

Futures-N/A

Options-Sell the January 27, 14.00/13.00, put spread for 86 cents. Buy the January 1050 put for 5 cents. Package together for an 81-cent collection.

Risk/Reward

Risk-the maximum risk is 19 cents or $950 plus commissions and fees. Margin is $321 per spread. We project new crop beans drop to where we closed last year at 1050 or at least make a run for the gap at 12.97. Call me with questions.

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

312 957 8103

888 391 7894 toll free

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slusk@walshtrading.com

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