Grain Spreads: Oil Share Unwinds
Please join me for a free grain webinar every Thursday at 3pm Central. We discuss supply, demand, weather, and the charts. Sign Up Now
Commentary
Beans closed moderately lower, dragged down by weakness in bean oil. Soy oil prices fell more than 2% today, reflecting disappointment that the U.S. Environmental Protection Agency again kicked the can down the road in finalizing biofuel policy in my opinion. The industry hoped to get final clarity on small refinery exemptions. However, the EPA is now requesting comments for another 45 days, which in my view means that the EPA is no closer to finalizing biofuel policy than it was in June. Look for a potential unwind in the oil share trade. In other news, and this was no surprise, the FOMC lowered rates this afternoon by 0.25%. Traders are waiting for the Trump/Xi call on Friday and whether ag products, specifically beans, may be mentioned in the discussions. If not, the market may be disappointed, and prices could come under pressure after the meeting. Expect both sides to say it went well but specifics will be needed to get traders optimistic enough to push prices through the August highs. For a trade idea, look at cheap meal calls. It’s likely we won’t be receiving any meaningful guidance on biofuel policy until 2026, which is a kick in the gut for those long oil and short meal. Heading into winter is where meal sees better demand as end users seek coverage for a long winter. I see bean yields dropping as late drought in the East is taking the top off this bean crop. As we enter into month and quarter end. Funds still short 100K in meal approximately. Trade idea below.
Trade Ideas
Futures-N/A
Options-Buy the March 2026 soymeal 330 call at 3 points or $300 plus commissions and fees.
Risk/Reward
Futures-N/A
Options-The risk is the price paid ($300) plus trade costs and fees. Work an order to exit a $20.00, for a 2K collection less trade costs and fees.
If you would like to receive more information on the commodity markets, please use the link to join our email list Sign Up Now
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
311 S Wacker Drive Suite 540
Chicago, Il 60606
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.