Commentary
The hot and dry conditions that stressed crops in central and northeastern Brazil during the weekend will continue early this week. However, the models continue to show moisture relief for Center-West Brazil the last half of this week, but they’re trimming back the amounts. In my opinion soybean meal and soybean oil found support this morning from a move by Argentina to raise export taxes on those products from 30% up to 33% to match the tax currently on soybeans. Shipping goods through the Red Sea has become riskier as multiple ships have been fired upon in the last few weeks. Crude Oil rallied almost three dollars in early trading before giving much of the rally back by the close. Rising insurance costs given the terrorist attacks ultimately raises the costs on goods and therefore major world shippers like Maersk are avoiding the Red Sea. Should rains miss in Brazil the next few weeks there is no doubt we could see a holiday inspired rally into year end and into the January crop report. Throw in some geo-political tensions, and we could rally back near November’s highs. I attached a meal chart below along with a diagonal option play into early next year. Should the rains continue to miss in Brazil, I look for the March 24 meal futures to rally to the 50- and 100-week moving averages near 4.30. March meal settles at 4.01 today. Trade idea below.
Trade Ideas
Futures-N/A
Options-Buy the March 4.10 meal call while selling July 450 call at even money minus commissions and fees. ZMZ24C440:H24C410[DG]
Risk/Reward
Futures-N/A
Options-unlimited risk here as one is short a call option that doesn’t expire until late 2024. This is a bullish strategy into Mid-January 2024. If filled at even money, one may put a stop loss at 5pointsd to risk $500.00 per spread. Or I would exit if futures traded under trendline support at 3.90. See chart.
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