All eyes and ears from people involved in agriculture will be focused on tomorrows WASDE report coming out at noon EST. I have posted previously the estimated acres from February's report but those numbers are expected to change if the trade experts are to be believed. The grid below shows the estimates from a Reuters poll which shows a drop in corn and an increase in soybean acres. This would be the first time in this countries history that soybean acres exceeded corn acres.
Brazil’s soybean harvest is now 65% complete vs 62% average despite wetter than normal conditions. Yesterday, AgroConsult raised its Brazilian soybean production to 118.9 mmt (new record) vs their February estimate of 117.5 mmt. It is just hard to find any good news that would support soybean prices.
Below are technical charts for corn and soybeans. Once these moving averages, oscillators and what not turn lower, it usually means that the smart money traders have lost interest and have moved on to trade other things. Now tomorrows report could change this for a short while but what usually happens is that it takes extreme weather events (as well as extremely lower prices) to attract buyers back into the market.
The market does not always want to do what we expect or want. That said, if these numbers hold true I would expect higher corn prices and lower soybean prices. If you have not made any pricing moves, I have a few ideas which I have posted below.
On the corn page there are three option strategies that I recommend. These strategies obviously show a bullish bias due to the trade estimates that have been reported.
1. Buy May $3.80 calls now to re-own bushels sold on the recent rally ahead of tomorrows report. These calls are currently trading at around $.0425 cents.
2. Buy September $4.20 calls at $.10 cents as "courage calls" to support making sales this spring or summer. These calls are currently trading at $.145 cents. It would likely require September corn to trade to $3.80 for this order to get filled.
3. Sell December $3.50 puts at $.08. Selling the bottom end of your subsidized revenue insurance protection near the average harvest price of 3 of the last 4 years to generate premium to offset the cost of your MPCI policy or options that you bought. These puts are now at $.07 cents.
The soybean strategies below show a bearish bias due to a good South American harvest kicking into high gear, slow exports domestically and more US acres expected to be planted this spring.
1. Buy the May $10.00 put option today at $.08. These options won't expire until April 20, so they'll protect against USDA, Brazilian and political risk for about 4 more weeks.
2. Buy the November $9.80 put and sell the $10.80 call. Today, this spread would trade for a net cost of zero cents. This puts a net floor in Nov futures @ $9.80 while accepting a ceiling at $10.80.
If you have a commodity broker you are using, feel free to forward this information if you desire to participate in these strategies. If you need a broker, I am happy to help you open an account with me. Just click on this link and follow the instructions. https://www.rjobrien.com/Esign/index.php?broker=37213 Call or email me if you have any questions.