Grain Spreads: Lock in $12.00 Soybeans

Commentary

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Yesterday, we discussed hedging $5.00 corn. Today $12.00 beans are discussed for hedge purposes using March 27 options for both crops. Today soybeans were the leader of the market, taking support from building demand and concerns over US production outlooks amid increased demand from China. One prominent crop tour is finding pod counts well below last year and the five-year average with the complex possibly already in a rationing position that could catapult new crop prices to the 2023/2024, 6 cent gap near 12.98. The general consensus is that US crop potential is currently getting smaller, not larger, and this is giving futures support in my opinion. We are also seeing elevated risk buying in the market due to weather events mostly both here and overseas and geopolitical developments. At the end of the day, the Chinese premier is meeting with Trump at the end of September. The market could be pricing in announcements of new demand potential for US Ag products across the board. Or it could be just a re-echoing of past agreements. Whatever the case, an unknown becomes a known, and in my view a potential buy the rumor and sell the fact event. In any case, a producer in my opinion given a 300 million bushel carry in the market, should consider locking in a small percentage of their crop at 12.00 at present.

Soybean Hedge. Lock in 12.00 Soybeans

Buy the March 2027 soybean 12.00 puts. Sell the March 2027 Soybean 1160/1200 call spread. Bid the spread at even money less trade costs and fees. 

Margin is $1244.00

The maximum risk if bought at even money is 2K per spread plus commissions and fees.

Please call me with questions.

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

312 957 8103

888 391 7894 toll free

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slusk@walshtrading.com

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Walsh Trading

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