Commentary
It was the second straight session of heavy selling in wheat, as KC or HRW led the way lower. As wheat followed corn and soybeans higher, it has reversed in tandem with corn and beans in my opinion. US wheat remains overpriced versus overseas markets. US HRW (hard red winter)is still $100/mt over Russian origin. It is my belief that Russia won’t renew the Ukraine Grain Agreement on July 18th. I would imagine recent events have perhaps pushed the govt to become less motivated to allow exports as it has a corner on world trade currently. Export sales expectations for tomorrow’s report are below what transacted this time last year. This is becoming a major issue as harvest advances. Once these supply side issues become priced into the market, the lack of demand pressures price and selling emerges. This will push the US further behind and perhaps call for another downward revision from the USDA in its new crop export projections possibly raising ending stocks. Canada released their planting objectives with agency StatsCan putting all wheat plantings at 26.92 million acres down slightly from the April estimate but +6.7% over last year. Spring wheat acres at 19.475 million, slightly higher from the April estimate and up 8% from last year, durum acres at 6.03 million acres down slightly from the April number and near year ago. Trade idea for producers only.
Trade Idea
Futures-N/A
Options-Buy the October 780 KC wheat put and at the same time sell the Dec KC wheat 920 call for even money.
Risk/Reward
Futures-N/A
Options-The cost to entry if filled at even money or parity is zero dollars plus trade costs and fees. The risk is unlimited and this strategy should only be implemented on a small percentage hedge basis by those who produce wheat.
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