We started off the weeks demand with a weekly export sales report.  Bean sales for future shipment were 505-thousand metric tons, up 4% from the previous week and up 54% from the four week average.  Yet prices moved lower off the release of the report, as China our number one bean buyer, was in for only 128-thousand.  

On the surface, the 505 looked friendly to bullish to many, but it only matters what China’s number is because they buy 90% of our exportable soy beans.  China’s purchasing of US beans has been fading, as Brazil continues to harvest its crop and sell at a discount to the U.S. prices.  We look for demand to China to continue to slow through April, as Brazil overtakes us as the primary port of origin for soybeans in the world.  Corn exports came in at 435-thousand metric tons, down 13% from the week prior and 29% under the four week average as key Asian buyers backed away ahead of next Tuesday’s quarterly stocks and planted acreage report.

Though traders expected a 2-million acre increase in beans, many were looking for a 4-million acre increase that would have been very bearish on the March 31st Planting Intentions report, pushing beans sharply lower on report day and holding those lows into the close.  Needless to say after this report that the surprise was for the most part bullish, as the market closed 5 cents higher on report day.  US 2015 soybean seeding intentions were a record large 84.64 Mil acres, up 940,000 acres from last year, but below trade expectations of 85.8 Mil acres.  The below expectations is the key here, and with weather issues during growing season, it could point to higher prices. Now that the report is behind us, you will constantly hear “It’s not what you plant, rather what you grow”.

The Trade

As the market trades fear before fact …

  • I would look at purchasing the July Soybean 11.00 call and sell two July soybean 12.00 calls for 3.4 cents or in cash value $175.00.
  • There are two risks here with the first being cost of the spread plus all commissions and fees.
  • The second being if the market trades up past the 12.00 level prior to July Soybean expiration as the position has one extra short call at 12.00.

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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.