Grain Spreads: Grain Gameplan

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Gameplan

Managed Money has pushed out to a very aggressive long position in the market. For the grain complex it’s not uncommon for this time of year. Trump asking China to buy more beans, an upcoming EPA announcement that may require a more aggressive bio fuel mandate that requires increased soybean crush to increase bean oil inputs for renewables, and the War with Iran That said, at some point ahead of the crops getting planted and the initial stages of development occur, funds will lighten up and book profits ahead of the uncertainties of key yield development time in July and August.  We have seen funds sell or liquidate in April, May, or early June. Next week we have planting intentions on 3/31. Bean acres look to increase vs corn year on year. 3 to 4 million acres of beans added versus 3 to 4 million acres less of corn year on year expected.  Prior to the quarterly report on 3/31 it was announced today that Secretary Lee Zeldin reiterated this morning that the release will happen by the end of March, while it is widely expected that the release will happen Friday when President Trump hosts farmers and biofuel producers on the south lawn of the White House for a "Celebration of Agriculture" event. This to me could be a buy the rumor and sell the fact event in bean oil. 

Trade Ideas- Grains.

Funds Aggressively Long. Chart Below

Buy the Rumor and Sell the Fact in Play.

July 26 Corn

Buy the July corn 460 puts. Sell the 430/460 call spread. Cost to entry even money. Max risk is 30 cents per spread or $1500.00.

Suggested risk is 12 cents from entry or $600 per. 

5 spreads suggested for a max risk of 3K plus commissions and fees. 

Target is for July corn to retest the unchanged level on the year at 440. 

Should this occur, collect 20 cents per spread of 5K less trade costs and fees.

July 26 Soybeans

Buy the July Soybean 11.00/10.40 spread for 6 cents or $300 risk per spread plus commissions and fees.

10 spreads suggested, for a total risk of 3K per spread plus trade costs and fees. 

This market broke out from the 10.60/10.70 area in early February; I expect it to go back there and re-test.

Offer to exit the spread at 30 cents per spread for a collection of 15K on 10 spreads less trade costs and fees.

August 26 Bean Oil

Buy the 56 put. Sell the 52/56 call spread. Collect 250 points or $1500 upon entry less trade costs and fees.

I look for bean oil to retreat to the low 50s. to the 10% higher threshold. Risk 100 points or $600 per spread or 3K on 5 spreads. 

Our target is for Aug bean oil to trade down to the 5200 target or 10% higher on year threshold. Should that happen, we will work orders to collect 250 points on the way out. If realized that trade would collect 500 points or 3K spread or on 5 spreads, 15K all day, less trade costs and fees. 

Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

312 957 8103

888 391 7894 toll free

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slusk@walshtrading.com

www.walshtrading.com

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