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Commentary
Beans finished the session a few cents weaker in much lower volume trade than Friday when daily volume spiked to an 8-month high. The market drifted in a tight range after the USDA data Friday was slightly bearish and the lack of morning flash sales favors the bear camp as China demand is the one of the few things in the near-term that the bulls will be looking for to hold prices up in my opinion. The market continues to reflect on the USDA’s 53.1 US yield posted on Friday. The USDA has had a relatively stable yield so far this season which leaves a big question mark out there for the market to solve in my view. Has the USDA seen enough harvest to successfully pin the crop for the year or is a big change coming in November as harvest ramps up? Products especially tight meal supplies in the very near term had beans trading positive into the close Friday and sent November beans to finish ten cents off the lows today. While US is ramping up harvest, Brazil is in full planting mode. Brazil is 20% planted versus 14 percent last year at this time. Meal and Oil need to remain firm to hold beans up in my view or we could enter sell the rally mode in beans as harvest progress expands. With this in mind, consider the following trade.
Trade Idea
Options-Buy the January 1280 Soybean puts. Sell the 1250/1280 call spread. Cost to entry even money.
Floor under Jan beans @1280 until Xmas.
Max cost and risk is 30 cents or $1500 per spread.
We suggest risking 12 cents from entry or $600 plus all commissions and fees.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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