Commentary
One scenario I could see playing out here in the next few weeks could be that funds wash their hands of a portion of their bullish bets after the next two USDA reports only to rebuy the market heading into planting and growing season. I like beans to the long side further out. The USDA has issued whispers for new crop bean carry-out from their outlook forum at 150 million bushels. Current old crop carry at 120. Not much of a change and very low on the balance sheet with stocks to usage historically tight. The 150 million bushel 21/22 carry-out will be adjusted accordingly to this year’s plantings and production with weather deciding the crops fate. Whether it’s 89 million acres or 91 million planted which is essentially the range of estimates going into the planting intentions report on Wednesday, it maybe the old crop ending stocks number on Friday April 9th that could create the biggest market response. Remember its not what is planted that drives price, its what you can grow.
Our export inspection numbers this morning revealed the following. Exporters shipped out 66.7 million bushels of corn, 9.6 million bushels of grain sorghum, 15.6 million bushels of soybeans and 11.1 million bushels of wheat for export in the week ending March 25. Exporters have shipped more than 91% of USDA’s current soybean export target with a little more than five months left in the marketing year. Weekly shipments of soybeans to all destinations combined need to average just 8.6 million bushels through August 31st to hit USDA’s target for the current year. They’re currently at close to twice that pace. In my view the USDA would need to adjust its ending stocks estimate as exports exceed their current estimate. Will they adjust is one of the big question the next few weeks. One possibility that could play out is for bean ending stocks get cut, but that crush is revised lower and imports of beans rise. Although with the rise in shipping freight costs, it’s hard for me to imagine sizable imports. Regardless it could mitigate any major bullish ending stocks surprise or a number that is below the most bullish expectation. As harvest advances in Brazil and then later in Argentina, new crop beans at the 12.00 level maybe the better value on the Board. If looking for a new crop game plan, I would implement a defined risk option strategy using Nov 21 options.
Trade Recommendation
Futures-N/A
Options-Sell the Nov 21 14.00/13.00 put spread at 82 cents OB. Market settled at 79.4 today so we are looking for a little price break to get filled.
Risk/Reward
Futures-N/A
Options-One is collecting 82 cents or $4,100 upon entry minus commissions and fees. Place a buy stop at 92 cents, risking approximately 10 cents or $500.00 plus trade costs and fees. To keep the 82 cent collection, the soybean market would have to close above 14.00 at Nov21 option expiration In late October. This is just one way to establish a bull position, I have other ideas regarding bullish bets using futures, futures spreads, and options.
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