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Is a Straddle or Strangle Right for You?

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Good Morning!From Allendale, Inc. with the early morning commentary forNovember1, 2017.

Grain marketsare quiet as we enter the month of November. Soybeans were 6 cents higher for the month, while corn closed 9 cents lower and December wheat futures were down 29 cents. Will new money come into the market as buyers or seller?

USDA's monthlyreport on oilseed crushing will likely show that about 145.4 million bushels, of soybeans were processed in September, according Reuters survey. The report will be released this afternoon at 2:00 pm CDT.

Option sellingstrategies such as straddles and strangles has been a topic our clients are talking about, to benefit in a range bound market. We suggest you talk to your banker and broker before jumping in with both feet. It is important to understand your risks and the potential need for margin requirements if the market makes an unexpected move out of the trading range. Volatility in corn is near record lows which reduces seller's premium. Call an Allendale Broker today, to discuss your situation.

USDA November Supply and Demandreport will be released on November 9th. There will be several analysts releasing estimates today and tomorrow. Trade is looking for ending stocks to edge higher in corn as harvest yields are surprisingly large and exports shipments lag the amount needed to meet expectations.

Fundswere estimated to have been net sellers of 7,000 corn and 5,500 wheat contracts. They were flat in soybeans.

Technically,corn is trading only a few cents above the 3.42 lower range support. A close below that level could cause further selling. December wheat futures closed below recent lows creating technical selling on Tuesday. Soybeans futures are toying with key chart support of 9.81 in the January contract.

Chinese farmersare expected to switch wheat crop production to specialty varieties which reap more revenue, after the government lowered the support price for wheat.

Economic marketswill focus on the expected release of a detailed House tax reform bill this week and the conclusion of the FOMC meeting this afternoon has traders expecting an unchanged monetary policy. The busy economic calendar will be capped by Friday's Oct payroll report, which is expected to show a strong +310,000 increase on a recovery from hurricane disruptions.

Fed Cattle Exchangehas 1,515 head of cattle being offered for auction today at 10:00 CT. Feedlot trade this week is expected to be a couple of dollars high. Packer margins are in the black and their goal is to keep the chains running at full capacity.

October live cattlefutures went off the board in strong fashion on Tuesday, closing at 120.50.

Short covering, technical and fund buying is providing the energy for the livestock complex. Many are giving credit to the positive US economy and the most notable indicator, the US Stock Market for helping us chew through the large meat supplies.

February 2018 live cattlefutures have tested near-term resistance at 130.00 with the next level (using the monthly charts) at134.00. Support is the gap left after Monday's trade at 125.15.

Cash hogsand lean hog futures continue to climb higher as it seems there is an unending demand for pork.

October Pork Monthwas a very good month for pork producers. The February lean hog futures started at 65.05 and closed strong near contract highs of 73.00.

Dressed beefvalues were higherwith choice up 3.12 and select up .26. The CME Feeder Index is 156.92. Pork cutout value is down .03.

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About the author

Paul Georgy serves as president/CEO of Allendale, Inc., a worldwide agricultural advisory and research firm that provides agricultural commodity price research and risk management alternatives for producers, major food companies, international corporations, foreign governments, and major news vendors.

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