Corn and beans once again found no friends as overnight rallies along with intra-day rallies found aggressive selling. Managed funds have been active sellers the last few weeks and look to be short 44 K contracts of beans while short 60 K contracts of corn as of June 26th according to data from the CFTC. For corn, managed funds have sold over 173 K contracts beans to go from net long to a sizable short. This morning beans bounced 15 cents from the morning lows to trade two cents higher for the session but then sold off to finish the day ten cents lower. Funds seem to be piling on selling rallies as trade fears continue amid optimal growing weather. This afternoons condition reports showed a two percent drop in beans to 71 percent good to excellent while corn fell just one percent to 76. Its probably not enough to spark fear here of a worsening crop unless it becomes a weekly trend. Recent 90 to 100 degree temps were reported all over the Midwest this past weekend and we will need to see more of the same absent of moisture or it could be a race to the bottom ultimately. Outside of the weather. if a deal is reached or the saber rattling over the tariffs subside, beans and corn would be immediate beneficiaries. The fear currently is China will look elsewhere to fill their insatiable need for beans with talk of them substitute a corn/wheat mix for their massive feed rations bypassing beans. Its noise as far as I’m concerned. Since this tariff talk and $2.00 break in beans, the more likely scenario is for some horse trading to enter in where non-traditional buyers emerge and buy from the US and later switch to China. Time will tell.
Long term bean option strategy.
Sell the March 19 820-800 soybean put spread and collect 7 cents. Use that collection to purchase the March 19 10.00-1100 call spread for 11 cents. Spread cost 4 cents. Risk is 20 cents. if March 19 settles below 8.00 at option expiration next February. I have a number of long term ideas in beans not just this idea. In my view it seems that the 19 contracts offer better opportunity to catch a bigger protracted move in the market.
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