Grain Spreads-Case for Meal

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Commentary

Bullish case for soymeal comes on a few fronts and I will make this quick. Heading into winter, end users in my view extend feed coverage. That comes in many forms with meal being one. Considering $5.00 corn, almost $8.00 KC Wheat, $7.00 Chicago wheat, grain prices are elevated for many reasons headlined by $12.00 soybeans. Meal is too cheap in my opinion. China made another purchase of beans overnight. This time China bought over 700 K metric tons of soybeans, with another 720 K metric tons going to unknown destinations. The sale was the largest in over a year for China but also in line with the necessary average purchase rate to hit the 25 million metric ton promise by the end of the 26/27 marketing year. See the weekly continuous chart below. It is my belief a rally will take us to at least the .382 retracement at 361 or potentially the 50% retracement at 389. I submitted one conservative trade idea below. I have many more to discuss. 

Trade Idea

Futures-N/A

Options-Buy the March 2027, 360/410, call spread for 5 points or $500 plus trade costs and fees. 

Risk-the risk is $500 plus commissions and fees. Risk the spread to 1.50 or $150 cash value to an approximate risk of $350 plus trade costs and fees. Offer the spread at a 25.0-point exit, for a net gain of 20 points or 2k less trade costs and fees. 

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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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