Commentary
Corn export inspections declined for the third straight week, from 30.7 million bushels three weeks ago to just 18.9 million bushels on the most recent reporting week. That compares to 41.9 million bushels on the comparable week last year and a 37 million bushels five-year average figure. Cumulative inspections stand at 493.5 million bushels, down just short of 200 million bushels from last year’s pace with the halfway mark of the 2022/23 marketing year. Therefore, the debate continues whether the loss of corn production in Argentina, lack of acreage in the US in 2023 are offset by the 2022/23 declines in exports and ethanol usage in the US. Traders expect minor adjustments to USDA’s U.S. balance sheets in tomorrow’s Supply & Demand Report at 11am Central time. U.S. ending stocks are expected at 1.266 billion bushels; up from 1.242 billion bushels in January. Unless we see an uptick in demand, a weather premium most likely will need to continue to hold corn and bean prices up. The wild card though is Ukraine. Should the Russians reengage deep into Ukraine once again, all bets are off. That said, even with a reemergence of war, I would consider this option strategy through March for downside exposure.
Trade Ideas
Futures-N/A
Options-Buy the May 23 Corn 660 put and sell the new crop December 520 put. Offer the spread at even money. ZCZ23P520:K23P660[DG]
Risk/Reward
Futures-N/A
Options-The cost to entry if filled at even money is zero dollars to enter the trade, aside from commissions and fees charged. However, this is not the risk. The risk is unlimited, so I’m suggesting a stop loss GTC. I’m looking for a corrective move lower in old crop corn from 673 to near 645 to 630 on the Board, maybe all the way down to 6.10. This would put the long option (K23660P) in the money versus a new crop contract most likely still not in the money. One can put a stop loss at 8 cents on the spread or approximately $400.00 plus trade costs and fees for protection. Call me with questions.
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