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Commentary
Strong gains in all wheat classes with prices closing near the high of the day. Weather and the uncertainties they bring right before Soft Red winter wheat harvest in the Eastern Belt and Hot and dry conditions in Europe brought funds that are now short wheat reasons to cover. Record breaking heat now seen across the European Union with little rain seen for the next 10 days across the major crop growing regions, this in our view will certainly take the top off the crop across France, Germany, Poland and into the Baltics but it’s not a disaster with the crop close to maturity. That said, US maps have major rains for soft red winter areas that are not good and we are starting to hear rumors of more more quality issues in Missouri, Kentucky, and the delta. Rumors swirling in Indiana, Ohio, and Illinois as well as record rainfall in some areas have caused crop quality concerns. Funds short 80K contracts currently of Chicago wheat. Weather leans bullish in US soft red winter and the EU. I see more fund short covering to continue. With this in mind, I suggest the following trade.
Trade Ideas
Options
Buy the August wheat 6.50/7.00 call spreads for 7 cents or $350 plus commissions and fees.
Risk
The cost and max risk on trade is $350.00 We suggest risking no more than 4 cents upon entry or $200 plus trade costs and fees. Offer the spread at 25 cents to exit, for a gain of 18 cents, less trade costs and fees.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
311 S Wacker Drive Suite 540
Chicago, Il 60606
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