Commentary
Despite downside reversals in Corn and Soybeans Friday, dips were bought today across the grain board. Corn was dragged higher by the soybean complex and closed 1 penny higher for the day. Harvest is proceeding in the Midwest, though it is scattered but concentrated enough in the South to post a harvest number of 5 percent complete. Demand in my opinion aided beans today. Soybean exporters sold 132K destined for China during the 2024/25 marketing year as reported by the USDA Export Flash Sales. Soybeans led the sector higher today on fresh Chinese buying and dryness in Center-West Brazil. Soybean planting may be delayed until rains return to the region. Forecast models don’t see that happening in the 1 to 5 or 6-to-10-day forecasts. However, a wetter pattern could be returning as we enter calendar to October. That’s later than farmers would want, but it is soon enough to avoid crop risks. Yet, the market continues to add some weather risk premium because confidence is low in forecast models that far out. The question is, will this rally be able to sustain itself in the face of a record harvest that is just getting started in the United States with limited storage availability? The recent purchases from China are supportive for price and may increase over time especially if planting gets pushed back in Brazil past the optimal early October window. That said Brazil just needs to produce an average crop and we are cut out of any meaningful export business into China. On top of that we could see a few cancellations early next year. We are sitting on a 560 million bushel carry out. Its massive historically where the path of least resistance is lower for price in my opinion. Anything above 400 million is comfortable. The point here is that even if China buy another 100 million bushels of beans above USDA expectations, we are still sitting on a comfortable carry out. The average trade guess for Thursdays USDA report is 565 million, up just 5 million form last month. The range of guesses is from 443 to 670. The average guess for yield at 53.2, unchanged from last month with a range of 52.0 to 54.9. All this aside trade the charts. Resistance for November beans is at 10.26 and then 10.32 and 1038. If we clear those area 10.50/55. is next. Above here and its 10.90. Support is 10.04. A close under and its 9.76/9.72. Underneath this area and its 9.50. If one is looking to hedge unpriced beans, consider the following trade below. Risk reversal far out on the calendar.
Soybeans
Futures-N/A
Options-Buy the May 25 10.00 puts and sell the July 25 12.00 calls. Buy the risk reversal at even money minus trade costs and fees.
Risk: Unlimited as one is naked a July 25 12.00 call that doesn’t expire until late June 2025. The goal is to put a floor at 10.00 into late April 2025.
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Sean Lusk
Vice President Commercial Hedging Division
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