Corn, Soybeans, and Wheat — all had a nice bounce up this week. A lot of commercial traders were short the contracts and after the WASDE report last week sealed in all the ‘bad’ news, some profit-taking by the short commercials turned into a bandwagon buying-fest to pop prices up. Another component that is somewhat supportive for Corn is that delayed plantings continue to mount in the last half of May. As I’ve mentioned delayed planting means shorter maturity/grow time and lower yield (supportive to prices.)
Both Corn and Soybean prices will continue to be subject to getting bounced around – as trade talks and rumors about talks abound. Those things are (obviously) unpredictable. The May WASDE report has the average “to-farm” price for Corn down to about $3.30 per bushel. I suspect later in the season that will go back up closer to last year’s at about $3.60 due to lower yields, and even higher IF trade talks bring great news. I’ll be watching Corn closely because I want to shop some DEC19 Corn CALL strikes. I can hope for a little higher prices than today (~388 cents for DEC19) and perhaps a little higher IV% (implied volatility) in the options. This is one of those times that it is virtually impossible to guess direction of the next major move of ten cents or more. Last year the 2018 DEC18 contract peaked at 426 cents in late May. Without an huge unexpected event (trade talks, crop damage, more floods, etc.) the high for the DEC19 contract this year could be 388 to 420; this is only an ‘educated guess’ but I’d be willing to sell calls with DEC19 prices ten to 20 cents higher than today’s price (388.)
Soybeans: No real changes here either. The grain prices for corn, soybeans, wheat often move in sympathy; a big UP day in anyone of them will tend to “drag” the others prices with it. Such as this week the soybean prices going up with the corn. Interesting that NOV19 soybean prices recently bottomed at 815.5 and in only 3 trading days are now up to 857 today. Percentage-wise both beans and corn moved up about the same amount. DEC19 Corn has moved up in the same period from a low of 363.75 to today at 388 5.1% up for Soybeans and 6.6% for Corn- almost the same ‘bounce.’ I am considering selling more soybean CALLs; I’ll wait a few days and see what prices do.
The NOV19 chart (above): Look back at the contract high last year of 1006. Also you can see the WASDE chart on bean fundamentals (below) and compare the STU and avg price of last year to this year. Here’s the KSU chart with WASDE updates for 10 May: Note the average price-to-farm (the small red cube on the right) indicating the new crop 2019-2020 will be just over $8.00, and a little lower than 2018-2019. The higher the STU (% of Usage), the higher the inventory of beans in stocks. You can see on the chart, you have to go back all the way to the mid 1980’s to find inventory as high as it is now – and prices back then dipped below $5.50. I might look at selling the $10.00 NOV19 bean CALLs, depending on premium.
Crude Oil: Here’s the real wild-card-of-the-week. Mid-East news of the military posturing always has the potential to spike crude prices. There is no headline or sentence I could put in this line that wouldn’t be subject to change in the next few minutes. Between propaganda, political positioning, and news networks ability to create eye-catching & fantastic headlines, it’s difficult to find hard news to try and make decisions. There not much change in the fundamentals of oil for now – so prices depend on news coverage and any official announcements by involved governments.
Gold Prices: I will likely go ahead and close out my SEP19 1160-strike PUT at 0.20 or 0.30 very soon.
A note: The TRADE COMMENTARY for next Monday 20th May – will not be posted until Monday after 1PM Eastern time. Many of you have probably noticed I usually post it early on Sunday afternoon, but I’m traveling this weekend.
Comment: Just an observation: I, like many of you, could not help but wish I had closed both the short NOV19 soybean CALLs and banked the profits. There is still a nice profit in the short 1200. If I could have the full genius of hindsight, I would have done that of course. I wasn’t so surprised that Corn prices moved up, but I was surprised by the huge jump in soybean prices. The good news is, I still feel quite safe holding the short NOV19 1200 and 1100 CALLS, and I’ll be checking out premium on the 1000-strike CALL soon.
That’s all today. Keep in touch with the Crude Oil news.
A special welcome to our first subscriber from Denmark. Velkommen Flemming
We have subscribers in 15 countries now.
If you are new to the newsletter and the concept of selling commodity options, you can check out our new YouTube channel by clicking this button:
The commentary and examples are for teaching purposes only and are not intended to be a trading or trade advisory service. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein on the web site and/or newsletter, are committed at your own risk, financial or otherwise. Trading with leverage could lead to greater loss than your initial deposit. Trade at your own risk. Investors and traders are responsible for their own investment/trading decisions including entries, exits, position, sizing and use of stops or lack thereof. This is not a trade advisory service and is for educational purposes only. The content on the pages here is believed to be reliable - but we cannot guarantee it.