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Commentary
Soybeans experienced significant volatility yesterday. Prices dropped sharply following news that President Trump may delay a visit to China, the number one buyer of U.S. soybeans, triggering a limit down move of $0.70 per bushel. Today, soybeans traded with expanded limits of $1.05 per bushel and have shown some upward movement especially in the deferred contracts, possibly supported by speculation surrounding an upcoming agricultural event hosted by Trump, where final biofuel guidelines may be announced. Yesterday’s panic washout pushed aside all other stories that were able to be considered and traded today in my opinion, including the NOPA crush number, which continues to imply a marketing year usage of at least 2.635 million bushels vs the USDA’s 2.570. The crush could be as high as 2.700 at this rate. regardless of additional Chinese purchases near term for old crop beans, which is highly unlikely for the 25/26 marketing year, The USDA looks like it is too low on crush that could result in decreasing ending stocks alone in the amount of 75 to 110 million bushels. That could drop 25/26 ending stocks from 350 currently to the 250/275 range. The marketing year is halfway over, and the industry will have to cut back to last year’s monthly crush rates to meet the USDA forecast. In my view once we get past biofuel mandate announcements and planting intentions, look to be a buyer of meal using December 26 options. It is undervalued in my view and an appropriate risk to reward ratio in my opinion. I see bean oil acting in a buy the rumor and sell the fact trade that emerges eventually (post biofuel announcement) which should aid meal longer term.
Trade Ideas
Futures-N/A
Options -Buy the December 350/400 call spread for 4 points or $400 plus commissions and fees.
Risk/Reward
Futures-N/A
Options- This is just one strategy of many that we are considering long term. The maximum cost and risk is $400 plus trade costs and fees. The maximum one could collect is 5K less trade costs and fees if both strikes finished in the money at option expiration on 11/20/2026.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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