Common thinking in the grain market has been that the potential for tariffs that may be enacted by China for US Ag products has been the reason for the recent sell-off. To me, the tariff talk can be equated to pouring salt in the wound. In this case of grains the existing wound would be optimal planting and growing weather so far followed by weak demand for beans and corn. The tariff talk simply puts future demand into question. The tariff talk simply made the decision for many looking to buy dips or to hold onto longs to simply exit and re-evaluate. Beans have lost over 1.50 since the last week of May with funds and specs alike liquidating previously held positions amid optimal growing condition. Corn approx. 55 cents. We are getting closer to where I would look for bounces into the acreage report at month and quarter end where uncertainties regarding supply side will supercede demand albeit for a report day rally. New crop or deferred month contracts is where I think one needs to be if you are looking at buying long term. Old crop carry for corn and beans is way too ample for any sustainable bounce. So I will lay out trades to consider because the charts are telling me we could challenge major trendline support for corn at 346-347. Should that happen look to consider buying dips using the following ideas.
Buy the July19/Dec19 corn spread. This spread settled today at 1 cent July 19 over. Look to buy it at 3 cents July 19 under with a stop at 7 under. Long term target at 25 cents July 19 over.
Buy the March 19 410 -450 call spread at 6 cents. It settled at 8 cents today. Risk to 3 cents.
To me, these are small bets that have good risk to reward that could encompass many bullish inputs that could emerge down the road. One does not have to be married to these positions long term as the increased volatility may enable to scalp the market if one is trading multiples. For Beans, funds could press here and knock the market down another 35 cents to 8.70 before its all said and done. Increased acreage along with no weather scares and that could happen. But I don’t see that happening until late July or August when the market has a better feel on what this crop is or isnt. Personally I would love to own Jan 19 beans at 9.00 should that occur. Consider two trades here but always use stops.
Buy the Jan bean 10.00 call and sell the Jan bean 11.00 call at 10 cents. Settled 15 today so we need a dip. Risk to 5 with objective to 50.
Buy the Dec 19 meal/July 19 meal spread at 6.0 over Dec 19. We suggested buying this at 5.80 last week and since it has bounced to 7.3. Look to buy a dip and risk to 2.0 over with an objective of 22.0 Dec 19 over.
Call or email me with questions or comments. I have other spreads we are considering and can discuss them with you at anytime. 888 391 7894 or email me at slusk@walshtrading .com
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