The soybean market has been on a slow grind higher for the latter half of this summer, due to this past August as being one of the driest on record.
USDA DATA
Last Thursday’s monthly crop production report showed that the weather in August might have disrupted what could be this year’s final production numbers. Soybean production was put at 3.149 million bushels, 106 million lower than last month’s estimate. However it was the lower ending stocks number coming in at a dangerously low of 150 million bushels versus the last two months reported at 220 million and 295 million that had beans up over 40 cents on the day.
Remember that it was last year’s 125 million bushels ending stocks that led to record high prices for soybeans.
GAINS WILL BE LIMITED
It is my opinion there are three reasons gains will be limited this week in corn and beans.
- First, weather through the end of the month is expected to be cooler and wetter, taking away the Sunday-Monday rallies due to heat and dryness the market has seen up to this point.
- Second, we don’t have another crop report coming to be feared bullish for a month.
- Finally September seasonally is a down month, as farmers clean out the bins of remaining old crop grain which lowers cash prices and futures to make room for the new crop. If you look at the chart, a double top was made up at the 1409 level, and failure by the bulls to take that level out to the upside due to a bullish USDA report last week to me is telling. Support for November beans came in for this week at 1350, and then below there at 1335. A close under 1335.0, sets up as 1285, as the next target to the downside.
SOYBEAN PUT
I propose buying the November Soybean 1280 put for a purchase price of 12.4 cents, or in cash value, $625.00. The risk on the trade is the price paid for the cost of the put plus commission and fees. I will look to carry the trade until months end as recent shorts may cover before month and quarter end. If we can get a significant down day, anywhere close to 1280, look to exit the trade.
Please call or email me with other trade recommendations and to attend our free weekly grain webinars.
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.
