U.S. exporters sold another 150 thousand metric tons of beans to an unknown destination Tuesday. (6/28) Unknown is spelled C-H-I-N-A in the corn and soy complex. Of the 150 thousand total, 132 thousand were designated for old crop delivery. Through the first three weeks of June, U.S. exporters have sold roughly 80 million bushels of soybeans versus 15 million last year and 14 million in 2014 for the same time period. This is telling funds that Chinese demand is being shifted to U.S. ports following South American production losses. Despite a high good to excellent condition for this year’s soybean crop at 72 percent which is an all time high for this time of year and well above the ten year average at 64 percent, funds shrugged and rallied the bean market 30 cents from low to high Tuesday. (6/28) The reason being is that there is talk in the market that demand could be revised higher by 30 to 50 million bushels for both old and new crop which tightens the stocks outlook. WX Risk, the Ag weather site sees drier conditions to maintain well into July with a possibility of a heat dome moving into the Midwest during the second half of July. These reasons are why the bean market has rallied over 65 cents in just two sessions from low to high this last week of June.
The highly anticipated quarterly grain stock and planted acreage numbers are released Thursday morning at 11 AM Central. Traders are looking for a jump in bean planted acreage of one and half million acres from the March report for an average trade guess at 83.8 million acres. Some estimates have planted acres up to 3 million acres more planted. The soybean/corn ratio has been pushed out to 2.82:1 and a potential test of the all time highs at 3:1 could be seen. Following the report and a three day holiday weekend, the market regardless of what bean acres increase too will go back to trading weather. Those looking for either bullish or bearish exposure or protections I the bean market may consider the following trades. Utilizing the increased premiums in old crop beans, I would suggest the following options trades for exposure on either side of the market. For downside exposure, look at selling 2 September soybean 1400 calls for 7.4 cents apiece while buying the January 17 10.00 put for 6 cents cost. For bullish upside exposure look at buying the Nov bean 1300 call while selling 2 September 10.00 puts for 4 cents. You may be able to package these options for a purchase price of ten cents.
For those interested I hold a weekly grain webinar each Thursday at 3pm. It is free for anyone who wants to sign up and link for sign up 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.