February 21, 2017
BUY ALL THREE:
CORN, WHEAT & SOYBEAN MEAL
I have no idea in what order these three markets will go on the upside, nor which of them will have the biggest percentage move, but I absolutely believe we WILL see Bull Moves in all three before we get to the July expiration…And using the 1 & 1, I want to own all three of them, here and now.
As is being indicated by surging stock markets all over the planet, I continue to believe that the USA and World Economies are experiencing a dynamic, and long lasting, upswing…which when paired with RECORD WORLD DEMAND for any number of commodities (these three included), can only mean rising commodity prices in any number of markets.
I am not going to get long-winded here…If you have been reading my commentary, you know where I stand on the economy, and interest rates and these three major agricultural markets.
I think all three are going up. I want to own them all.Who knows if it matters, but exports ARE strong…and running well ahead of last year…
MARKETING YEAR-TO-DATE INSPECTIONS
Current Year Last Year YOY Increase
Wheat 18,376,473 14,421,155 +27%
Corn 24,422,897 14,027,258 +74%
Soybeans 42,665,362 37,550,639 +13%
And who knows if it matters, but the weather just seems to get warmer and warmer…and stranger and stranger…including California going from years of drought to recent statewide flooding…Or that Chicago (in the heart of the Midwestern grain belt) has had NO measurable snowfall for the past two months…in December and January?
Abnormal weather…whether here on anywhere on the globe…is NOT conducive to normal crop production…And I maintain that between now and summer’s end, we WILL have either some true crop weather scares, or outright failures…or both…that can negatively affect production in any or all of these crops.
Recognizing that any of these three markets CAN go down before they go up, I AM RESOLUTELY USING THE 1 & 1 IN ALL THREE MARKETS…Simply stated, I will not become less bullish just because any of them happen to go down…and the 1 & 1 CAN put me in a position to recoup my original investment…and then re-establish new longs, at lower…BETTER PRICE LEVELS.
Conversely, Corn, Wheat and Soybean Meal do have the size moves I am anticipating, I know the money spend on the puts as “insurance” will NOT be missed.
I am buying July Calls…with May puts a defense…in all three markets...absolutely, absolutely using the 1 & 1 approach…IT JUST MAKES SENSE.
And if Corn goes down from here…
And if Soybean Meal goes down from here…
And if Wheat goes down from here…
Total cost for all three…$6011…
I think this is a great, great idea…But, of course, it all three markets just sit here dead in the water, it is possible that all of these options could expire worthless, meaning you could lose 100% of your investment.
On the flip side, all three COULD make the bull moves I am anticipating…or I wouldn’t be even writing this…And I would then add, I have NOT put anything other than MODEST upside objectives on these charts…the point being, given a weather situation, ANY of these three markets…or for that matter, all three…could obviously go MUCH bigger than anything I have suggested here.
Don’t think, “Let’s see what the Eurodollars do.”…They appear to be doing the right stuff and DO appear to be one good day away from an outright collapse…But how the Eurodollar trade works has NOTHING to do with whether or not this Corn-Wheat-Soybean Meal combo is also a BIG potential trade.
And please don’t ask me, “Which one do you like the most?”, as my honest answer is, “I haven’t got a clue. All I see is that the math, and probabilities, say DO ALL THREE…THEN LET THEM HAPPEN…As I have noted before, if two of them are total duds, and just one of them just makes what I would call moderate move, you could still come out solidly ahead…And again, if all three of them get it going…?
AND I WILL REPEAT…ANALYSTS EVERYWHERE KEEP BLEATING, “BIG SUPPLIES ARE BEARISH”…ALL I SEE IS A WORLDWIDE DELICATE BALANCE BETWEEN SUPPLY AND DEMAND…AND RECORD DEMAND FOR ALL THREE OF THESE COMMODITIES THAT IS NOT GOING TO BE DIMINISHING…I AM A BUYER…AND STAYING THAT WAY.
Give me a call if you are interested…
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Corn, Soybean Meal, Wheat, Eurodollars.