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Commentary
Wheat led the grains higher following escalated fighting in the Black Sea between Russia and Ukraine. This caused damaged to export terminals in Ukraine, further cutting into export ability. Ukraine is already reporting a 33% decline in grain exports this year. Attacks in the Sea of Azov is also impacting Russian exports, with 25% of the country’s wheat moving through that region. There were also reports this morning that US strikes on Iran hit a wheat storage facility in that country. Soybeans started the session under pressure but were quick to rebound as follow through selling did not materialize.
The Russia-Ukraine conflict dominated the grain markets today as the attacks and counterattacks have halted grain trade in the region, especially for Ukraine. Cancellations abound, and shipping companies are withdrawing ships from the area. There was even a report of a ship carrying corn from Ukraine to Italy being struck by Russian forces. Rumors and stories are all over the place, but if the fighting keeps on, the market in my view keeps working higher. I attached a chart of Dec corn. I think this market gets pulled higher near term to 4.84, which represents 10% higher on year, and if that level is surpassed, a run to the low 490s, with this in mind, consider the following trade.
Trade Idea
Futures-Buy the Dec26/Dec 27 corn spread at 22 cents Dec 26 under. Look for the spread to move near parity, as corn potentially follows wheat and crude oil higher. Place a stop at 30 cents Dec 26 under, risking 8 cents from entry or $400 plus all commissions and fees.
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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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