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Commentary
The wheat complex traded defensively overnight with additional pressure seen at the day session open. A two-sided market with the uncertain rain forecasts bringing the wheat market to the positive side in the second half of the session. Wheat posted a correction to start the session from yesterday’s gains but found support from elevated global demand and ongoing concerns over drought in the US Plains Sellers were unwilling to try and push values below their respective 20-day moving averages, which helped support the rebound in values. Again, no natural seller coupled with lingering drought-like conditions across 70% of the US wheat areas and cold temps for the weekend will keep values from breaking in my opinion. There was little fresh news on the Iranian war today with the US blockade in full effect. President Trump indicated the war is almost over today though, although he is planning no extension to the current ceasefire. Tomorrow’s weekly export estimates ranging from 75-250k tons old crop with same for new crop. Last week’s sales total 163k with 90k new crop. Funds are again net short Chicago wheat while being long KC. If precipitation chances deteriorate, we could leg higher amid fund short covering in Chicago. Trade Idea below.
Trade Idea
Futures-N/A
Options-Buy the July Chicago wheat 630/7.00 call spread for 12 cents or better ($600 cost) plus commissions and fees.
Risk/Reward
Futures-N/A
Risk/Reward-Risk no more than 6 cents or $300 from entry plus trade costs and fees, using a GTC stop loss. Offer the call spread at 40 cents to exit for a gain of 28 cents, less trade costs and fees.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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