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Commentary
The March WASDE released this past Tuesday was generally price-neutral, featuring minor adjustments to the U.S. balance sheet that ultimately offset, resulting in no net change in ending stocks. USDA’s production estimates for South American production declined slightly on lower expectations for yields in Argentina. Reuters reported on Wednesday that Cargill has paused soybean exports from Brazil to China this week due to Chinese requests for stricter sanitary evaluations. This development comes just two weeks ahead of the Trump-Xi meeting where agricultural trade will undoubtedly be an important topic. Corn, wheat and soybean futures have rallied since the start of the war, taking a cue from surging energy prices. Soybean oil has led the way in the grain and oilseed complex, as surging crude prices boost demand for vegetable oils and other biodiesel feedstocks. Meal has quietly gone bid as bean oil has rallied over 40 percent higher on the year. I think longer term; one would want to establish a long position in meal. It has been a big loser to oil over the last 12 months, but with biofuel mandates to be released by month end we could eventually see a buy the rumor/sell the fact trade in oil share. Given the state of things in the Middle East, I'm not looking for an immediate unwind but as we get deeper into 2026., a longer term gameplan using March 27 soymeal options should be considered in my opinion.
Trade Idea
Futures-N/A
Options-Buy the March 2027 Soymeal 350 call. Sell the March 27 soymeal 4.00/3.50 put spread. Bid at -35.00 on the three-way option strategy for a $3500 collection upon entry less trade costs and fees. ZMH27C350:P350:400[3P]
Risk/Reward
Futures-N/A
Options-The maximum risk is $1500 plus commissions and fees. One is collecting $3500 upon entry. We are looking for March 27 meal to trade from the 310/315 level to move significantly higher to the 370/380 are later this year. Should that occur, we will look to exit the position. Margin per this post is $842.00 per spread.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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