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In the current market commentary, election uncertainties, potential China tariff retaliation following a Trump win, and rainfall in Brazil, where planting is catching up to historical averages, are factors preventing beans from maintaining a bid. Wheat has emerged as a bright spot, with the first condition scores of the 2025 winter wheat crop revealing a USDA rating of 38% Good to Excellent, down from 47% the previous year and compared to 28% two years prior. This early data suggests a potential for trend yields, but it’s still very early in the season. Recent Chinese purchases of US beans have somewhat closed the gap of the USDA’s projected 1.85 billion shortfall. The current pace is approximately 100 million bushels below, but this can change rapidly if Brazil’s weather turns hot and dry. Conversely, a mild growing season in South America without significant weather threats could result in ending stocks not falling below 500 million bushels, which is high in comparison to comfortable stock-to-usage ratios. The corn balance sheet has been slowly shrinking due to aggressive exports to Mexico and ‘Unknown Destinations.’ Despite this, the 24/25 corn crop is growing with each monthly supply-demand report from the USDA. Corn export demand is expected to prevail, though this may not be realized until after harvest. There are many ‘ifs’ and ‘maybes’ in this scenario, but here are some hedge trades to consider if you’re storing corn or beans: For beans, my strategy involves locking in a price of $10.00 out to late February using March 2025 options. For corn, I recommend locking in a price of $4.50 out to late April using May 2025 options. Beans Strategy: – Lock in $10.00 on March 2025 soybeans. – Buy the March 10.00 put for 38 cents. – Sell the 1160/1200 put spread for 38 cents. Risk: The maximum risk is 40 cents or $2,000 per spread, plus all trade costs and fees. Corn Strategy: – Buy the May 450 puts. – Sell the Dec 25 530/500 put spread for 25 cents. This strategy aims to finance the May 450 puts at even money by selling the put spread further out on the calendar, providing an opportunity to buy back the put spread cheaper in the long term, while also locking in 450 on the May 2025 board for what might be unpriced in storage.
