Grain Spreads: Nov26/Nov 27 Soybean Spread

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Commentary

USDA offered no surprises in yesterday's WASDE report. Somewhat expected. The more important report comes at month end in my view as planted and harvested acres and on farm stocks are released. With war raging in the Middle East there’s a lot of noise on how inhibited the fertilizer market could get with shipping lanes blocked and /or delayed. Soybeans in my view are less affected by fertilizer costs in their production than corn. While fertilizer quotes are clearly higher, so are corn prices. Depending on the area and operation, the corn rally has covered the increase in fertilizer costs in my opinion. The concern going forward is whether it has to continue to rally to cover any further increase in nitrogen prices. Additionally, the concern is whether the conflict in Iran is going to strike at ports that handle fertilizer.  In my view the news just increases the talk of more corn acres going to beans. Planted and harvested acreage are expected to increase for the 26/27 crop season as China is back buying US origin for now. But now other concerns have risen with the war. The longer it goes, the greater the concern. Nov 26/Nov 27 bean spread below. This spread made a near term high at 55 cents Nov 26 over to start the week. I suspect anything over 50 cents over is worth investigating as it is over bought in my opinion. It is my belief that we should see prices and this spread retrace some as biofuel mandates finally come available while increased noise about less corn acres moving to beans gets louder. Trade idea below.

Trade Idea

Futures-Sell the November 26/27 futures spread at 50 cents November 26 over. 

Options-N/A

Risk/Reward

Futures-Risk 8 cents or $400 plus commissions and fees from entry using a GTC stop loss at 58 cents, if you are short from 50 cents. The objective is to cover the spread at 12 cents Nov 26 over, for a gain of 38 cents less commissions and fees.

Options-N/A 

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 US Soybean Supply/Demand Balance Sheet

Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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