How low can we go here? Beans and Corn are in free fall so far this week and to me it seems that trend and index following funds could push this market lower until there is a reason to buy. With a Chinese delegation in Washington DC this week, the soy complex could use a shot in the arm regarding renewed buying interest from our biggest soy buyer. That would most likely rekindle some buying interest on the headline. Supply side reasons to get long are few and far between for now as there isn’t a meaningful USDA condition report until September 12th. Weather and crop tours up until now have been for the most part optimal regarding condition. Albeit a few trouble spots emerging in the Dakotas and Minnesota lately for beans with corn looking optimal still in the major production states. It feels that funds could press both corn and beans lower into month end, then look to cover shorts post Labor Day into the next crop report.
For beans , watch Dec meal. We are at a key trend line at 323. Should it fail look for a move to 310.3 the yearly low. If 310 doesn’t hold, 296 could be next. If one is looking for a cheap option play consider the following:
Buy the Oct Meal 310 put for 2.00 OB. Cost is $200.00 plus commissions and fees. As of last Tuesday according to COT data, managed funds were long 56 K contracts. That’s probably somewhat overstated now but still sizable. With the sizable long, I feel that buying some affordable puts here might be the safest bet. This option expires on 9/21.
Technically Nov beans should push to 856 on the charts as long as they close below trend line resistance at 883. If 856 doesn’t hold, look for the summer lows to be tested at 826 in my view. We may not see a major move lower (if at all), until the market gets any info on any future trade deal with China into the weekend. Export Sales tomorrow at 730 am with September option expiration on Friday. Those looking at bean options should consider the following:
Downside: Buy 1 Oct Bean 820 put and sell the Oct bean 930 call for even money. If filled be out of this spread on a November 18 bean futures close above 906, Options expires 9/21.
Upside: Buy the Nov 920 call. Sell the Nov 960 call. Sell the Nov 1000 call. Cost 1.4 cents plus commissions and fees. Major risk here if Beans settle above 1040 at option expiration on 10/26.
I would consider both trades here for a strangle.
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