Grain Spreads: Call to Action May 2025 Soybeans

Sean LuskGeneral Commentary Leave a Comment

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Commentary

Soybean prices were all over the place today as multiple headlines created some wild swings in price. In the end prices found moderate losses following a round of technical selling and profit-taking on Wednesday. March futures fell 10.75 cents to $10.56, with May futures down 9.25 cents to $10.68. The rest of the soy complex was mixed. March soymeal futures tracked 1.5% higher, while March soy oil futures tumbled almost 3% lower. Soybean basis bids dropped 5 cents at two Midwestern processors and eased a penny lower at an Ohio elevator while holding steady elsewhere across the Midwest. In my view it was more of a wetter forecast for South America that won the day along with potential easing of tensions between China and Brazil. In my opinion headlines initially helped soybeans rally at first with China saying it had barred imports from a few companies operating out of Brazil due to some unapproved levels of pesticides found on the soybeans in certain shipments. Brazil consulted with China on the matter and the suspension should be temporary and not affect shipments overall. Without a clear disruption of a marked amount of Brazil soybeans to China, the market lost part of its bullish catalyst in my opinion. The South American weather forecast for the next 10 days is turning more favorable for soybean production. Basis levels in Brazil have started to soften some in my view which has capped rallies at 10.60/10.70. Technically for the remainder of the week, March beans have major resistance at 10.76 (trendline) and 10.79 (50 week moving average). We close over these levels, and we trade up to the 50 % retracement from last May’s high to December’s low at 11.01. We push above there and the market trades to 11.10, which is 10% higher on year. If we push below the Bollinger band at 10.53, we can retest the weekly low at 10.39. A close below there and the bottom could fall out back to unchanged on the year at 10.10. Funds have built a net long in beans now on hot/dry weather in Southern Brazil/Argentina and bullish data on exports and ending stocks versus expectations from the January 10th crop report.  While weather can flip flop, Brazilian harvest and a potential lack of a weather premium in Argentina will determine the outcome for beans in my view. Increased tariffs could also factor especially if it enhances the chances of Chinese bean cancellations of previously made purchases in my opinion. 

Trade Idea

Futures-N/A

Options-Buy the May 1020 put. Sell the May 960/1020 call spread. Collect 30 cents upon entry minus trade costs and fees.

Risk/Reward

Futures-N/A

Options-The maximum risk here is 30 cents plus commissions and fees. One is collecting 30 cents upon entry or $1500 per three way. I’m projecting that if weather improves in S.A. that the market eventually challenges the Dec lows below 950. Should that happen look to exit the three way at a 60-cent collection on the way out, for a 90 cent gain approximately per 1 lot all day minus trade costs and all fees. However, should we see consecutive closes above 10.80 in March soybeans, exit the strategy with a loss. I would risk no more than 20 cents or 1K all day here plus trade costs and fees. Call me with questions

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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