This week has gone as expected. We started off lower Sunday night into Monday then short covering Tuesday morning until the close when the lows were revisited in corn, soybeans, and wheat. Weather remains ideal for growing so far. Last week’s (July 14-18) trading ranges were expanded as Monday’s low to the weekly high had soybeans rising over 65¢, corn 15¢ and wheat 40¢. Weather this week looks the same with moderate rain falling across the Midwest with warmer conditions which will help corn in its pollination stage. December corn support is 3.80, a close under sets up 3.65. Expect short coving at 3.65.
Mother Nature
Should the weather change adversely then 3.90 resistance will be taken out and we will test 4.12. November soybeans have resistance at 11.45 with support at 10.50. If next week’s weather holds true we could test the 1050 chart support but shouldn’t take it out. A close under 10.50 for November beans and 10.00 is next. I believe they will keep November soybeans above 10.50 next week and into the 11 to 15 day forecast next week giving us a look at weather as early pod setting begins the following week.
Weather Premium
The Soybean/corn price ratio is currently near historic highs. This indicates to me that the soybean market still contains a great deal of weather premium that will come out of futures if favorable weather trends are extended into August. On the other hand, if weather turns somewhat unfavorable for crops, futures may not rally like they have in the past because the premium is already built in the market. It is important to note due to high prices the high ratio is encourage Brazilian farmers to plant more beans on corn this fall. It is my contention then that at least in the near term that a sizable rally in beans would only take place if corn was able to rally in the weeks ahead.
Trade Idea
Going forward I propose the following trade. Look at buying the October Soybean 10.00 put and selling the October Soybean 9.00 put for 11 cents or a $550.00 cost per spread plus commission and fees. The risk on the trade is the price paid for the spread plus all commission and fees. If both strikes finish in the money at the time of option expiration, one would collect $5,000.00 at expiration.
Grains Webinar
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 p.m. central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
Related Reading
If you trade the grains—are you an Agrarian personality?
Agrarians are deliberate; they take calculated risks and don’t make up strategies or tactics on the fly. They do not change their methods or trading instruments very often. They value loyalty and tend to be loyal to one or two markets. Agrarians know their market of choice extremely well and seek to take advantage of its repeating patterns and cycles. Their goal is to find a clear, reliable method that they can apply over and over
