The good/excellent crop rating has not changed since early August. Therefore, from a statistical standpoint, there is little reason to adjust the USDA’s yield estimate from the August report. Weather was excellent during most of August for the Western Corn Belt. However, the Eastern Belt was dry during the last half of August, the critical time for pod filling. In addition, most double cropped beans are in the Eastern Belt and had shorter root systems than full season crops. Therefore, late planted beans were unable to extract as much moisture as full season beans. . China’s devaluation threatens US demand near term. End users such as ethanol producers and feeders in China can only buy grain from their government. The recent devaluation has them sitting on their hands waiting for a better currency value. Once the Chinese currency settles, end users there will chew up excess inventory quickly forcing the Chinese government to turn to outside markets like the US to replenish inventories.
This coming week motivation comes not from stock market declines or devaluations, but another hot dry week and a USDA WASDE report Friday that many will fear that the report will cut corn yields and possible bean yields. This leaves possible short positions to want to cover as they have the risk.
For a relatively low risk position trade I would propose the following options trade. I propose buying the January 2015 10.00 soybean call and selling one January Soybean 11.00 call for a purchase price of 5 cents or $250.00. The risk on the trade is the price paid for the options plus all commissions and fees. If both options expire in the money at options expiration one would collect $5,000.00 minus commissions and fees.
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 any time slusk@walshtrading.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.
