Grain Spreads: |Funds Add Longs to Corn/Beans

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Commentary

Weekly crop ratings dropped more than expected from recent weather, making the crop potentially more susceptible to future stress, should needed rains miss, especially in the Western belt where crop ratings are falling. Yesterday’s break in corn and beans did attract some export interest as  “unknown destinations” (China?) booked US corn with a purchase of 197,272 metric tons. USDA pegged the U.S. corn crop at 63% Good to Excellent yesterday, which is one point below the five-year average for the week, but 10 points below last year's level at this point in the season. USDA pegged the soybean crop at 63% Good to Excellent this week as well, but that is up 1 point from the five-year average for the week, although down 7 points from this same week last year. Managed funds in my view look to have bought 15K contracts of corn and beans today. Headlines around the US/Iran war still trying to move toward a new MOU as Trump met with Israeli leaders. Volatility could be pushing spec traders to the sidelines until better price direction is known. Producer selling also quiet. Calendar spreads in corn and beans saw some modest strength today, rebounding from yesterday’s weakness. Whatever your opinion of market direction posed by weather, demand, war, of trend and index following fund positioning, we aren’t staying at present levels in corn and beans. Either there are production issues or there isn’t. Option strangles are a good way to position in my opinion. Beans either trade to 13,00 basis November or revisit 11.00 into harvest. December Corn either revisits 4.40 or makes a run for 5.25. These are my opinions. I just don’t see new crop corn and bean prices chopping around at present levels in the long run. Call me to discuss, the door is always open for a discussion of gameplan with defined risk strategies for consideration.

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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