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Commentary
The main driver of the grain market in early trade today was pre-weekend position squaring and developments in the Persian Gulf. This week’s trade has been rather volatile, which is not uncommon in a headline-driven environment. Much of the outside influence has originated from the US/Iran war, but the current ceasefire has lessened the impact. Israel and Lebanon also agreed to a ceasefire this week, but the fact neither is moving troops away from combat areas brings the agreement into question. Iran did announce that the Straits of Hormuz are now fully open for all commercial vessels as a result of these ceasefires however and would remain open as long as the ceasefire lasts, Rangebound trade continues to define the soybean market. Domestic crush offers a firm underpinning, with NOPA’s report showing the second highest daily crush use on record for the month of March. However, a likely record-crop from Brazil and uncertainty around the outcome of the upcoming meeting between Trump and Xi prevent movement too far to the upside. Planting has been off to a quick start in the southeastern U.S., with warm and dry conditions allowing for plenty of fieldwork. Heavy rains came to portions of the Midwest this week that may have forced delays, but way too early to delve into planting delay concerns. In summation, funds are defending their position in the market until the Trump/Xi meeting in Mid-May in my opinion. Outside of a black swan entering in the market like the aforementioned meeting getting kicked down the road again, the path of least resistance is higher in beans in my view. Trade idea below.
Trade Ideas
Futures-Buy the July26/Nov 26 futures spread at 27 cents July over.
Options-N/A
Risk/Reward
Futures-Place a sell a GTC sell stop at 20 cents July 26 over, which risks 7 cents or $350.00 per spread plus commissions and fees. If filled at 27 cents, work to sell the spread at 70 cents, a for a gain of 43 cents less trade costs and fees.
Options-N/A
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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