June 21, 2023

 Weather Market in Corn, Soybeans and Wheat

One of the hardest things to do in this business is reverse your opinion…but that is what I am doing here…There is no bigger bullish factor in the row crops than abnormal weather, and hot, dry conditions in the Midwest have produced a dramatic upturn in Corn, Soybean, and Wheat prices during the past few weeks…And when it comes to unfavorable weather, experience has taught me that there is no telling how big, fast and high these markets can go. In the same vein, I also have learned that it is foolish, and costly, to pridefully cling to my opinion when an unexpected major event occurs (like a drought) that absolutely DOES impact and alter the supply-demand equation of a market…which certainly appears to be the case right now.

With that in mind, in spite of the fact that Corn, Soybeans, and Wheat have already had fairly strong rallies, last night I fearfully reversed myself, and began to get long all three of them.

I definitely don’t know how high they might be going…It all depends on the weather… but what I do “know” is that what you do here is the hard thing, which is to buy them, however scary it feels, define your risk, and see what happens…simply because, in my opinion, THERE IS NOTHING BIGGER IN THIS CRAZY ASS GAME THAN WHAT HAPPENS WHEN A MIDWEST DROUGHT HITS CORN AND SOYBEANS…And as volatile, and frightening as it can be, especially if you’re getting on after the rally has started, a row crops weather bull market is not something I ever want to miss…

Obviously, just because these markets look like rockets right now (to me anyway), does NOT ensure that the lift off will continue, but that is a risk I am willing to take, as again, I do not want to be sitting here a month from now thinking, “I should have,” but was  too scared to make the move.

How to get long…

There are a few ways to go here…And yes, the options shown below are expensive, but I think they are not “cheap” for a reason…That being that the potential here might be tremendously greater than anyone would ever imagine…I mean, really, in today’s world, with billions upon billions of dollars sloshing around chasing bull and bear markets, my observation has been that price moves have become incredibly much faster, and BIGGER, than ever has been the case. And just to throw it out there, not as an expectation, but definitely as a possibility, it would not surprise me if never-before-seen $20 a bushel Soybeans finally became a reality. No, that is not a prediction…but just my own understanding that, in this stuff, any price, no matter how high it seems, is absolutely possible.

And as usual, my recommendation is to do all three…to cover all the bases…

Regarding the next 2-3 months…

One - If this weather move is going to happen, historically, it tends to be over and done within the next 4-8 weeks…after which it typically becomes a GIANT short that, more often than not, does go relatively straight back down….ALL the way back down…

Two - I would add that if this move does NOT go anywhere…that if we get any immediate sign of a turn back down (like dropping 30-40 cents in Soybeans), or even just a 2-3 week pause without moving higher, to me it will be a loud and obvious signal that weather is no longer a factor, and that the bear market that started over a year ago is still in full force…thereby suggesting that my target of $10-$11 in July or August Soybeans will be back in play…And I will be back on the short side…

I personally am doing this with both options and futures…and the options above are not the only way to go…I’d also note that with the volatility we are seeing now, it is quite possible that the option prices shown here may be quite different by the time you read this.

Give me a call if anything interests you here…

Thanks,

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Corn, Soybeans, Wheat