Crop conditions out this afternoon showed declining ratings for both corn and beans. Lets put tariffs aside for a moment. Corn dropped 3 points on the week to 72 percent good to excellent while beans dropped 2 points to 69 percent. There are a few trouble spots most notably in Kansas and Missouri where good to excellent conditions sit at or below 50 and 40 percent respectively for corn and beans. Every growing season brings issues somewhere. It’s too hot over there or not enough rain over here are familiar refrains. With corn silking at almost twice the five-year average and bean pod settling at two times over the five-year average, the crop is growing and development is advancing at a sprinters pace. Are the downward movement in the weekly conditions then enough to spark a rally? It might be more plausible for a sustained rally if forecasts were calling for hot and dry through month end and beyond. The heat has been eroded in the 6 to 10 and 8 to 14 day now with meaningful precipitation the big question mark. The three I’s: Iowa, Illinois and Indiana show optimal condition for corn and for the part most beans so far this crop season. Until we see a more significant weekly pullback in condition from those areas, rallies that may occur most likely would be an opportunity to sell. The wildcard here are tariffs. Should both parties get back to the table, the market can rally immeasurably. Until then the rain needs to go away into month end and into August to prod funds to cover shorts and build a weather premium. Currently they are short corn 100 K contracts while being short beans 80 K in my view. Today’s push in beans at 10 cents higher and twenty from the low needs to be sustained. It seemed that they bought beans at the expense of corn and wheat today. To me, Nov beans need to hold 841 and Dec meal needs to hold 321.4 to hold the soy complex up. Near term resistance is 856 in Nov beans while Dec meal resistance is at 331.4. Should the market fail again, the 760-770 level on the charts could be a fund target to push this soy market to as it represents 20 percent lower for the year.
A trade to consider then: Sell the Nov bean 780 -760 put spread and collect 6 cents.
Use the collection to purchase the March 19 980-1080 call spread for 10 cents.
Spread cost 4 cents plus commissions and fees.
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