Commentary
Corn and soybeans traded higher overnight amid weather concerns, though they pulled back from their highs towards the end of the session. Wheat posted a two-sided trade overnight into Mondays session with Chicago up 3 cents, Kc down 1 cent, and Minneapolis up 2 cents. Spread maneuvering was featured. The change in the Midwest weather pattern happened as predicted in my opinion over the weekend, with much cooler temperatures dropping across the bulk of the Midwest. In my view this is potentially the first phase of the transition to an El Nino weather pattern that is expected to emerge across the Grain Belt during the current growing season. However, new-crop corn and soybean prices led the way higher this morning due to disappointing rainfall totals over the weekend. In my opinion It takes a progression of systems to put moisture back int the atmosphere following an extended drought when soil evaporation is limited. Strong El Nino’s typically erode a weather premium as cooler and wetter forecasts become the norm in the Midwest. Still, it’s never the same everywhere. On a small percentage hedge, I think it’s a good idea to at least explore of getting some corn hedges on in the 5.50 area new crop. Options in my view are a better play here as it leaves one with the ability to use futures to get long if a weather premium gets built into the market.
Trade Ideas
Futures-N/A
Options-Bid even money on the Dec Corn 5.20 Puts vs 6.00 Dec 23 Corn Call risk reversal.
| ZCZ23C600:P520[RR] |
Risk/Reward
Futures-N/A
Options-. unlimited risk here as one is naked short a $6.00 Dec 23 corn call. This strategy in my view is the for the Producer only as it is a hedge strategy for those who grow Corn. One can lock in 5.20 corn until option expiration in late November.
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Sean Lusk
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