Grain Spreads: Funds Record Short Soymeal
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Commentary
Managed Money record short soymeal in the amount of 150K short. Besting the old record net short by 40K futures and options contracts. Beans and meal closed lower today with a little profit-taking in old crop/new crop bean spreads this morning ahead of the 3-day holiday weekend. Funds don’t have a meaningful soybean position here, long just 12K as of this past Tuesday and after today’s close that fund position maybe closer to neutral. I like the upside trade in soymeal given the fact we are planting 3 million acres less soybeans than last year. Weather is still 90% of the pricing influence in my opinion and longer term forecasts a major unknown in regard to key yield development time which is July through September. A weather premium if built this Summer could in my opinion rally the new crop meal market to the 350/370 area from 312 currently January 2026 meal. Today, soymeal prices pulled back slightly while bean oil was slightly higher. The US dollar continued its downward slide this week. Pres. Trump threatened the EU with 50% tariffs on June 1 this morning if trade negotiations do not move forward quicker and that may have reminded traders the trade issues are far from solved. Longer term its weather and impact on future yields the driver. Avoid the noise and talking heads on tv. In my view one should have long option positions into 2026 for meal. In my opinion they won't stay short forever. This trade has the possibility to capture a weather premium both here in the US and South America planting and early growing season late Fall. In my opinion, excellent risk to reward ratios. Call me with questions. The trade idea below, is just one idea I have, not “the” idea.
Trade Ideas
Futures-N/A
Options- Buy the January 2026 350 call and sell the January 26 4.00 call for 4.5 points or $450 cost plus commissions and fees.
Risk/Reward
Futures-N/A
Options-the cost and risk of the trade is $450.00 plus commissions and fees. I’m looking for a move to the 3.50/3.70 area in new crop meal and if January futures rallied 50 or 60 handles from the 310 area, I would suggest exiting the position.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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