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Commentary
I think in delving into the numbers that there is hope for beans long term to return to Novembers highs and take them out and trade to 12.50. That is an upside target I have should weather hiccups occur this year. We closed 2025 at 1047. A ten percent move higher would push the market to 1151. A twenty percent move higher would push prices to 12.56. USDA updated its balance sheet on Monday. One bullish input that was given was the raise their soybean crush target to a record 2.570 billion bushels. Crush through the first quarter of the 25/26 marketing year (September-November 25) exceeded the seasonal pace needed to hit USDA’s target by 30 million bushels, which could be pushed higher. There is noise in the trade that crush could be moved higher in the weeks to come, which could push crush to 2.65 to 2.70 billion bushels. A robust number considering 25/26 soybean production just announced at 4.262 billion bushels. Ending stocks were raised this past report to 350 million bushels from 300 on lack of demand. However, increases in crush of 70 to 120 million bushels would negate a bearish supply outlook just given on the Jan 12th WASDE report. For this to happen we need government intervention in the form of finalizing policy. First, we need the EPA to complete its work on the final biofuel regulations soon. If they're bullish, it will still take a couple of months for the biofuel industry to reach full capacity. That assumes bullish guidance and there is a chance that doesn’t happen. There's still about eight different scenarios that could play out in the final rules, with lawsuits and exemption requests surely to follow. But let’s consider we are in mid-term election year. The last thing the administration wants is higher domestic crude and gas in my view. That would mean increases in biofuels (bean oil usage) and an increase in crush. The current crush numbers do not push the bean balance sheet into a rationing mode but may tighten ending stocks anywhere from 50 to 120 million bushels lower on higher crush. China is close to completing their 12 MMT purchase program for the 25/26 export program. Will they take all the sales for future shipment on inspection another matter. They have taken some, but the majority are still unshipped. They have promised to kick those purchases up to 25 million metric tons for the 26/27 crop year. Seeing is believing on that total. In my view if you want to be long soybean or corn, look at option ideas long term. The USDA just killed corn on Monday and didn’t do beans any favor. That said domestic policy can alter the balance sheet more meaningfully moving forward. Trade Idea below.
Futures
Options-Sell the January 2027 Soybean 1250/1150 put spread at 90 cents or better.
Risk/Reward
Futures-N/A
Options-the current spread settled at 85 cents. We want to sell it at 90. We need a further break in deferred futures to get filled at out price. If filled at 90, work an 8 cent GTC sell stop upon entry risking $400 plus trade costs and fees.
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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