Grain Spreads: January Soybean Harvest Play
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Soybeans began the week on a bearish note, reacting to the news that they were not on the list of goods to be exempt from Chinese tariffs. November futures pushed below the key $13.00 mark and failed to rally back above that level. The monthly oilseed crushings report from USDA showed 210 million bushels of beans were consumed in August, down 12 million bushels from last month, but up 12 million bushels from the previous year at this time. Local cash markets saw sharp movements in basis as the delayed harvest in the Midwest kept soybean supplies abnormally tight for late September. However, the forecast as of now turns to hotter in the western belt and much drier in all of the Midwest. We could see a deeper correction following the next WASDE report, provided that yields stick around 53 BPA. There is a lot of managed longs in this market. Any raises in yield that keeps ending stocks above 300 million bushels would be in my view bearish with the path of least resistance lower. With this potential, consider the following harvest trade.
| ZSF27C1250:P1250:C1230[3C] |
Trade Idea
Buy the January 1250 puts.
Sell the 1230/1250 call spread to finance.
Package the three-way option spread for even money.
Maximum risk per spread is 1K plus commissions and fees.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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