Commentary
NOPA soybean crush got off to its strongest-ever start to a marketing year at 165.5 million bushels, an even four million above the previous September record (set in 2020), and over seven million ahead of last year already. The USDA is looking for roughly a 4% increase in total soybean crush in 2023/24, which would mean that cumulative NOPA crush would need to beat last year by around 80 million bushels from Sept to Aug.
Along with the higher soybean usage, there was such a high bean oil usage it drove oil stocks into 9-year lows. The market reacted mildly yesterday to the soybean revelation because the USDA has projected a crush 88 million bushels more than the prior year and a number 7.4 million bushels greater than the prior September. So given yesterday’s data, it seems the stronger crush numbers are warranted for now. In my view, the bean oil stat was the surprise. Bean oil stocks come in at 1108 million pounds, below even the most bullish trade estimate and down from 1250 million in August and 1459 million last September. The lowest single monthly bean oil stocks figure for any month since the end of calendar 2014. Bean meal on the last dip down to 3.60 didn’t stay for long with the most actively traded Dec meal just settled underneath 4.00 today on a continuation rally in the last week. In my view I think the front contracts can sustain rallies higher as Argentina the Worlds number on bean crusher is short on supply until South American harvest later is 2024.
Trade Ideas
Futures-N/A
Options- Buy in the January 24 meal 3.90 calls and sell the August meal 4.30 calls as a spread for 2.0 points or $200 per spread.
Risk/Reward
Futures-N/A
Options-Unlimited risk here as one is short a call option with an expiration in late July 2024. Gamma paly here as we see January futures trading approximately 35 handles in the money while the summer months which are backward dated by almost ten points remain out of the money. Call me with questions for exit targets and stop loss targets. A close under 376 in the January 24 futures and I would be out of this trade given a bearish technical outlook in my opinion.
Please join me for a free grain and livestock webinar every Thursday at 3pm Central. We discuss supply, demand, weather, and the charts. Sign Up Now
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
53 W Jackson Suite 750
Chicago, Il 60604