Commentary
Consistent export demand from China, strong monthly crush numbers, and a drier weather outlook for Argentina were a few reason soybeans, soy meal and soy-oil rallied to end the week in my opinion. Demand prospects were helped today as USDA reported a daily sale of 122,000 MT of soybeans for delivery to “unknown destinations” during the 2021-22 marketing year. Today’s announcement follows three previous daily soybean sales this week, totaling 426,000 MT, to China or unknown destinations. In its monthly soybean crush report yesterday, USDA said U.S. processors crushed 5.91 million short tons (196.9 million bu.) of soybeans during October, up 20% from September, up 0.2% from October 2020 and a record for any month. Weather conditions remain mostly favorable for crops in South America, though a drier pattern is expected for southern Brazil and Argentina the next two weeks according to the National Weather Service.
While the aforementioned data points have been supportive for price in my view, I’m looking at calendar spreads for future opportunities to sell old crop and buy new crop beans. I included a chart on the daily July 22/Nov 22 spread soybean spread. I would love the opportunity to sell this spread at 72 cents July 22 over. This level represents a fifty percent retracement of the 2021 high/low. First, the spread needs to take out 52 cents July 22 over, to push this up to my sell target. Beans have been resilient here despite a carryout near 340 million bushels. While the market receives a non-surveyed report on December 9th from USDA , the bigger report the trade will key on will be the January 12, 2022 crop report. Should USDA increase US production or decrease demand estimates, we could see ending stocks swell to 400 million bushels for old crop beans. Couple that possibility with Brazil near harvest for a potential bin buster soybean crop, the result could be that Chinese demand for US soybeans falls off the table for cheaper Brazilian origin. Should that happen, this spread could be a good selling opportunity in my opinion, with an upside target to sell at 72 cents, should it trade there for the July22/Nov 22 soybean futures spread.
Trade Ideas-
Futures-work to sell the July 22/Nov 22 soybean spread at 72 cents GTC.
Options-N/A
Risk/Reward
Futures-If filled at 72 cents, work a GTC sell stop at 80 cents, which risks 8 cents or $400.00 per spread approximately plus commissions and fees.
Options-N/A
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