Grain Spreads: Beans to the Gap?

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Commentary

While the US-Iran conflict dominates the energy sector, the Russia-Ukraine conflict dominates the grain markets, as headlines steered the markets in unison while rumors and counter-rumors circulated. Soybeans took advantage of lackluster growing conditions in the Plains and continued sales to China to score fresh contract highs this week. Areas stretching from eastern Nebraska northward into the Dakotas have seen dryness, lowering expectations for yields. The pace of sales to China slowed somewhat according to this week’s export report, but new-crop sales remain at their highest for this time of year since 2022. 

Per Pro Farmer; “In soybeans, speculative buying was muted until October 2025 when China showed renewed interest in U.S. soybeans. Since then, two major liquidation phases occurred: mid-November 2025 to mid-January 2026 and early May to late June 2026 (190,417 contracts sold). Despite the latter, funds remained net long 31,200 contracts at end June and grew that position to +72,688 contracts by July 15, 2026 — compared to +59,165 contracts a year earlier. The soy complex has held a lingering bullish tone, largely driven by biofuel demand and stepped-up purchases from China, though it’s no stranger to volatility.”

With all this said, we aren’t staying at present levels. See Horizontal line on chart. That level represents a gap from the 2023 closing price to the 2024 opening price. Will the market return to that level? Or return to early summer lows at 11.25 on bearish El Nino weather patterns emerging in August? Strangle Idea below.

Trade Idea

Futures -N/A

Options-Sell the October soybean 1360/1300 put spread for a collection of 47 cents. Use the collection to buy the Dec 11.00 puts for 4 cents. Package the three-way option strategy for 43 cents. ZSV26P1360:1300: Z26P1100[1-1-1]

Risk/Reward. 

Futures-N/A

Options-If soybeans trade to the gap at 12.98, look to cover the short-put spread at 25 cents for a gain of 22 cents. Hold the Dec 11.00 puts into harvest and offer the puts at 16 cents to exit. 

Risk no more than 10 cents upon entry on a GTC stop or approximately $500 risk plus commissions and fees. Margin is $389.00 for this three-way option spread. 

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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slusk@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.