Grain Spreads: 4 Trades for Consideration

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Soymeal

I believe in meal long term due to 30-year lower harvests in the US Hard Red Winter Wheat belt and potentially EU due to heat and drought.  The thinking is less wheat moving into feed rations, where meal is a cheaper alternative. I'm not looking for miracles here, just an eventual move in May 2027 meal from 310 to 350/360. Should weather throw a wrench in either US or South American bean production due to EL Nino, we could see deferred beans and meal rally significantly, since China at least verbally is scheduled to buy 25 MMT of 26/27 US production. Pay attention to what they do and not what they say.

Suggested Course of Action. 10 spreads

Sell the May 2027, 410/360, put spreads for 46.00 points or a $4600 collection less trade costs and fees.

Risk is $400 per spread plus commissions and fees.

Objective should futures move from 311 to 350/360, is to cover the spread @ 25.00

10 spreads at a $2100.00 =21k less commissions and fees.

Natural Gas

Gas has been stuck in the mud since winter with no direction. No one wants to sell it below 3.00, nor buy above 3.50.  Demand is at a record, but so are supplies domestically. Foreign gas markets are much higher. Currently the spreads show, no reason for Henry Hub to tighten near term vs Euro and Middle East markets. Supply over demand for Nat Gas domestically has supply running over demand by 30% according to Nat Gas execs. These same execs see the spread tightening to near parity in 2027.  This market has an exportable demand story. That has been baked into the market and absorbed. The reason why it would rally further on demand is domestic. Data centers, pipelines, and Crypto data mining all require enormous amounts of power that the grid can't handle. Which begs the question, what power source do we have domestically that's cheap enough to power all of it?  Nat Gas. That's why many execs see the supply/demand spread moving to parity.

Suggested Entry-10 spreads

Buy the June 5.00/6.00 call spreads for $250.00 per.

Looking for a 10/1 return to sell the call spreads at $2500 per for a gain of 25K, less trade costs and fees

Soybeans: Buy the December 26 Soybean 10.80 puts for 5 cents.

Sell the May 2027 soybean 14/13 put spreads. For 85 cents.

Package collection is 80 cents.

Risk no more than 12 cents or $600 from entry plus commissions and fees.

Either we have crop issues or not.

Beans either fill a gap at 1297 or go back to last August 2026 lows at 9.80.

If we sell the 3 way strangles for 80, work to buy back at 40 for a gain of 40 cents less trade costs and fees.

Suggest entry 5 spreads.

Crude Oil

Read snippet below

Buy the June 2027, 100/110, call spread for 35 points or $350.00 per spread plus commissions and fees.

Objective is to sell the 100/110 call spreads for $2500 per less trade costs and fees.

5 spreads are suggested. I could see crude retesting high 80s /early 90s by year end.

Risk 25 points or $250 per spread plus trader costs and fees from entry on a stop.

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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