Commentary
Today, the USDA reported lower-than-expected export inspections of 1.724 million metric tons for the week ended Dec. 9, down from 2.334 (MMT) the previous week and short of expectations ranging from 1.9 (MMT) to 2.3 (MMT). However marketing year to date soybean shipments exceed the seasonal pace needed to hit USDA’s target by 10 million bushels. The big question in my view moving forward into 2022 is, can the US sustain soybean shipments at a high enough pace once cheaper Brazilian beans become available in the January and February time frame? In my view the trade is monitoring South American weather patterns along with near term demand. There is some cause for worry given the developing La Nina, in my view. Crops in southern 25% of Brazil and eastern 40% of Argentina remain dry, with limited rain chances in the two week forward outlook. This remains tough to gauge on total crop impact considering the rest of the crop is in excellent shape according to South American crop scouts and recent production estimates that were pegged at record levels in places like Mato Grosso. Last week I posited in beans a position to the downside and have another suggestion today.
Trade Idea
Futures-N/A
Options-three leg option strategy suggested for May 22 soybeans. Buy the May 22 11.00 put while simultaneously selling the 10.00/11.00 May 22 soybean call spread. Bid -90 cents upon entry. The risk on this trade is $1.00 or 5K. One is collecting 90 cents or $4500.00 upon entry minus commissions and fees. The risk is 10 cents or $500.00 plus all commissions and fees.
Risk/Reward
Futures-N/A
Options-To reduce some risk, one could put a stop loss at -97 cents. This would risk 7 cents plus all commissions and fees. We are looking for a deeper correction in soybeans into 2022 amid weaker demand for beans of US origin, as China may favor South American supplies that maybe available soon. The goal is to keep as much of the 90 cent collection upon entry as realistic. May 22 options go off the Board on April 22, 2022. There is ample tome for a larger protracted move in beans lower in my opinion. Please call r email me with questions.
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