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Commentary
If this fertilizer story or lack of availability to get enough fertilizer is real in the months to come, Sep26/Dec 26 corn could be a sleeper in my opinion and a buy. Sep corn is in the bin, and in our view would be the contract that could see the most demand, where the spread could trade to an inversion over Dec 26. Lots of variables here with a record Argentinean crop being harvested on one hand. However, we could see traders buy the rumors and sell the fact until this conflict is resolved. That said the ripple effects to get normal shipping flows could last month’s even if the regime is defeated this week. For today’s trade, the recurring stories that were revived surround the Strait of Hormuz and the effects it has on fertilizer and acreage. The news highlights of anecdotal statements from US producers and a one-off survey with rash conclusions regarding fertilizer decision-making in the US make for appealing reasons to buy futures first and ask questions later. The bottom line is the unknowable bias is toward fewer corn acres until the next survey is released at the end of June in my opinion. As long as the Strait remains in the headlines, so will the acreage story in my view. Crop progress showed corn at 38 percent planted nationally. That was up 13 points on the week and 4 points ahead of the 5-year average. Corn emergence at 13 percent, up 6 percent on week and up 4 over the 5-year average.
Trade Idea
Futures-Buy the Sept/Dec corn spread at 15 cents Sept under.
Risk/Reward
Full carry is 30 cents Sep under, so buying the spread at 15 under would make the maximum risk at 15 cents or $750- per spread plus commissions and fees.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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