The weekly export sales report for beans showed 410 thousand metric tons were sold last week down 34 percent from the week prior. China was absent from the buyers list. New crop year after September first came in at 29 thousand. Demand has slowed due to fresh harvested beans coming out of Brazil and Argentina. One event may have China returning to U.S. ports due to the Chinese cancelling three cargo ships of Brazilian beans due to disease. Brazil is treating the problem at the ports. But delays may be seen shifting demand to U.S. ports. But first things first, the USDA planted acreage report comes out this Thursday March 31st. It is a poll of how much of each of the grain will be planted. Last month’s Ag forum meeting suggested planting to come in at 82.5 million acres versus 82.7 last year. In other words no meaningful change in planted acreage. This will probably not be the case. With soybeans over 9 dollars and corn under 4 dollars it is more probable than not that we will plant more acres of beans over corn. Should the report come in suggesting farmers are to plant three million more acres or more, funds which went from holding a short position to a long position will temporally enter short again. The break could be half the recent 50 cent rally. This could take the market back to 8.84 support basis November. I would move into being a buyer of November beans at this level and look for the market to override recent bearish demand news and begin to build a weather premium in the market that reflects the uncertainty’s that el-Niño will bring to the growing season. Traders are already witnessing a growing season with too hot in the southwestern wheat states, and too wet in the southern delta corn and bean states.
With this in mind in regards to strategy I suggest the following trade. Near term I would look at some bearish positions in the market. However, in the long term I am suggesting bullish exposure as weather for the planting and more importantly growing season is a major question mark. For a near term bearish play, buy the May Soybean 890 put for 5 cents. The cost here in cash value is $250.00 for all commissions and fees. For longer term bullish exposure I would look at buying the November 10.00 call while selling two 11.20 calls for a purchase price of 5.2 cents. In cash value this costs $262.50 per spread plus all commissions and fees. In my opinion I would enter both trades ahead of the 11:00 AM Central time release of the planting intentions report on March 31.
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 PM 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. Or please contact me at anytime at email@example.com
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.