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Play Turner’s Take Ag Marketing Podcast Episode 277
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It is June, corn and soybean stocks are tight, and we are in a weather market. There is a WASDE report this week on June 10th and I don’t think anyone is paying attention to it. It is all about the weather between now and July 4th. We have some ideas on price ranges, trading patterns, and how to get through the uncertainty and volatility that will occur this month. Make sure you take a listen to this week’s Turner’s Take Podcast.
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According to the latest 6-10 day forecasts temps will be higher than normal and precipitation will be lower than normal. A lot of the weather services are calling for much of the same between now and July 4th. A weather market adds premium every day until we see rain in the forecast.
Corn: I like buying the $7/$8 Dec 21 call spread and selling the $5.00/$4.50 put spread. You can get that done under a dime. Spec traders will be looking for a big weather market. Farmers can use it to sell cash grain into this June and July.
Soybeans: I like buying the $15/$17 Nov 21 call spread and selling the $13/$12 put spread for around 30 cents. I don’t see a lot of risk right now below $13. Spec traders get upside exposure and farmers can use the spread to sell into at the elevator.
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Floors for Farmers
While I am still bullish on the grain markets right now, I know there is a lot of downside risk for farmers on grain not sold or hedged. I don’t think you need a floor for soybeans. Soybeans are going to be tight either way the next marketing year. I think soybeans are between $12 and $17 all year. Nov 2021 $12 puts are 7 cents. If you need a floor you can protect $12 for seven cents.
I feel differently about corn. We could see a few million additional acres and if the weather gets better and we have trend line yields or better, corn could be in the $4s across the board at harvest this fall.
Dec 2021 Corn | The Dec 2021 $5.50 put is about 37 cents. You could buy that and then sell the Aug Short Dated $5.50 put for 17 cents. They expire July 23rd and the total package would cost 20 cents. The idea is Dec Corn stays above $5.50 for at least the next few weeks. Either the Aug put expires worthless or we try to buy it back cheap on the next weather rally.
Farmers can also sell the Dec $8/$9 call spread for 10 cents to help bring down the cost of the floor even more. When we add in the short call spread the Dec $5.50 put floor strategy costs about a dime. The risk is if Dec 2021 corn goes to $8 (you will be short at $8 but that can’t be a bad thing for your marketing) and if corn tanks fast. That short short dated Aug $5.50 put needs to time to erode so that is a risk too.
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About Craig Turner
Craig Turner is a Senior Broker at Daniels Trading, author of Turner’s Take newsletter, and a Contributing Editor for Grain Analyst. Craig is often quoted in the Wall Street Journal, Reuters, Dow Jones Newswire, Corn & Soybean Digest, and also makes appearances on SiriusXM – Rural Radio Channel 80 providing commentary for the Grain and Livestock markets. Craig has also been featured in FutureSource’s Fast Break series, Futures Magazine Online, and INO.com. Mr. Turner has a Bachelors from the Rensselaer Polytechnic Institute (RPI) where he graduated with honors and has worked at the NYSE and Goldman Sachs. While at Goldman, Craig earned his MBA in the NYU Stern executive program. Learn more about Craig Turner.