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Commentary
Wheat prices were down overnight on weekend precipitation over Kansas but came back on bullish USDA acreage intentions and winter wheat area numbers in my opinion. The USDA report showed all wheat area at 45.35 million acres, compared to the average guess of 46.50 million acres, and versus last year ‘s 46.1 million acres, and 47 million acres from the Outlook Forum. Winter wheat acres came in at 33.31 million acres, versus the average guess of 33.9 million. As for intentions, spring wheat intended area came out at 10.02 million acres, compared to the average guess of 10.5 million acres, down from 10.6 million a year ago, and durum intentions were 2.0 million acres, versus the average guess of 2.0 million acres, down a hundred K from a year ago. Spring wheat plantings come in the lowest since 1970 with all plantings come in well below the estimate. Since wheat has been on a significant downswing ahead of the report, the bullish acreage number is getting the most attention, and post-report market reaction is strong, with Kansas City and Chicago roughly ten cents higher on the day post report but settling lower from the initial post report highs. There are still valid concerns about the US HRW crop health, and with all the weather premium erased recently, prices may be ready for a recovery. Furthermore, US SRW prices are the cheapest in the world.
Trade Idea
Futures-N/A
Options-Buy the December 2025, 7.00/8.00, call spread for 12 cents or $600.00 plus commissions and fees.
Risk/Reward
Futures-N/A
Options-Risk 8 cents or $400 from entry plus trade costs and fees. December Chicago is trading just shy of 5.90. It is my opinion; wheat can run higher back to the 6.50/6.70 area. Funds are short 90K Chicago, 45K in KC and 23K in Minneapolis. Today’s acreage shortfall and potential tariffs versus Russia could prompt short covering amid any potential weather premium that may be built.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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