Grain Spreads: Bean Pressure

Sean Lusk General Commentary 1 Comment

We are at a major point of support for beans and meal as funds have returned with vigor to the short side in both soybeans and meal. A fifty percent retracement from the September lows to the near term highs sits near 871. A move over 903 puts near term highs above 920 back in play. This is the simple technical outlook. While there’s flooding issues in the northern and western grain belt coupled with any thoughts of planting weeks away at the earliest in the US, a big crop emerges out of South America as harvest advances in Brazil and begins in Argentina for beans. Of all three grains, funds are short the least in soy, where this years ending stocks could be near a billion, almost double the previous record. The ending stocks story is a known in the market. Funds are heavily short corn and KC wheat at record levels. They are nowhere near a record short in beans. In my view funds don’t understand a bushel of corn from a phone booth and don’t care. Trendlines,Fib retracements, and moving averages, mostly guide their entries and exits. I posit a bean position into the month end end planting numbers and stocks in all position report Friday. Coupled with the trade drama with China that will re enter the news cycle into the weekend as a US delegation lands in Beijing tomorrow.

Buy the April Week 2 870 put and buy the April 910 call strangle for 5 cents. Cost is $250.00 plus commissions and fees. Under this level at 888 May beans, see chart, and its 871. Over 903 this week and its 922 in my opinion. Call em with questions and please join me for tomorrows free grain and livestock webinar at 3pm Central. Sign Up Now

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