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Commentary
A big Brazil harvest and better weather perhaps coming to drought-stricken areas in Argentina and yet the bean market still won’t turn over. Meal aided the beans today maybe and looks poised for possible more short covering. I think all the uncertainties at least for this week stem from the release of the AG forum later this week. It’s the first yearly look at crop potential. The soybean acreage and accompanying ending stocks is the elephant in the room, where the spec crowd is guessing that bean planting could be cut by as much as 3 million acres. We will see. The USDA will also generate its trend yields in the upcoming Feb Outlook Forum later this week. The yields generated for corn and soybeans will be the placeholders for the May supply/demand report until planting or weather imply otherwise. After last year’s misses from AG forum first and USDA last Fall, I’m not sure why anyone gives these guesstimates much attention this early. But that’s just me, as its not what you plant but what you grow. I attached a continuous meal chart below. We have key resistance at 3.06. A close over and the meal market can run to 317 to 320 and possibly if funds go neutral from short 50K, we could potentially see May meal run to the low 330’s. Lots of moving parts with potential tariffs and uncertainties on many fronts, so if I was going to take a long position, keep the risk relatively low in my view. Trade idea below.
Trade Idea
Futures-N/A
Options-Buy the April 3.05 call for 4 points or $400 plus trade costs and fees.
Risk/Reward
Futures-N/A
Options-The risk is the price paid for the option plus trade costs and fees. If May futures close below 298 for the week, exit the call or risk a $250 stop loss at $1.50, risking approximately $250 per call plus trade costs and fees. Offer the call once purchased at $20.00 for a 2K collection per option minus trade costs and fees.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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