Grain Spreads: KC Wheat Potential

Sean LuskGeneral Commentary


It is my belief that the Trade continues to watch for signs of progress in resuming grain shipments out of Ukraine. A Turkish official said all the details had been worked out for a resumption of Ukrainian grain exports via Black Sea ports, including a safe route for ships that will not require the clearing of sea mines. The market continues to lack much conviction with end-users continuing to sit on their hands until they are convinced, wheat is moving higher in my opinion. A story out late in today’s session reported Egypt cancelled 240,000 tonnes of Ukrainian wheat that was for shipment this past Feb/March which possibly pressured the market late. However, values recovered somewhat into the close as the wheat mentioned was not delivered just due to the war and Egypt just allowed their suppliers out of their contractual obligations for this grain. It is my opinion that Russia remains committed to its stated objective of taking control of southern Ukraine, including the ports, and that it has nothing to benefit from allowing grain to flow out that would help finance Ukraine’s ability to defend itself. With this in mind, I suggest the following trade.

Trade Idea


Options- Buy the October 22 KC wheat 9.00 call and selling the December 22 Kansas City wheat 10.00 call for a 2-cent debit plus commissions and fees. Symbol here: KEZ22C1000:V22C900[DG]



Options-Unlimited risk here as one is buying an October call option while selling a December call with an expiration approximately 2 months later. This is a volatility play utilizing the buying of a near term closer to the money call option, while selling a deferred call option $1.00 higher.  Note: As we enter into the trade as a spread, we exit as a spread. I would exit by Labor Day weekend, should we not see the underlying December futures contract trade over $9.00 at that time. One could utilize a GTC stop loss at 8 cents Over, which risks approximately 10 cents upon entry or $500.00 plus commissions and fees. 

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Sean Lusk

Vice President Commercial Hedging Division

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