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Grain Spreads:Breather


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Nov19/Nov 20 Beans and Dec 19/Dec 20 corn spreads have abruptly made a turn lower as the grain complex as a whole takes a breath with longs being liquidated. Sure there's long term problems and issues that will most likely keep this market bid in my view, at least until we get factual data on planted acres and then yield. However those questions wont be fully answered for weeks to come as a late planted crop due to a water logged Midwest won't reveal anything substantial to us until late July and early August. Today's break came on two fronts. First, weather reports for late next week and the first week of July look to bring warmer and drier days more suitable for field work and bean plantings especially in the plagued eastern grain belt of Illinois, Indiana, and Ohio. Stay tuned though, massive rains hit this week and upcoming weekend that could keep bean producers on a continued delay into the fields. Second, profit taking and liquidation occurred ahead of month and quarter end next week, option expiration for the July contract this Friday, and First notice next Friday along with the quarterly stocks report at month end. The market will obviously be listening to the USDA purview on acres planted, but with the data acquired and tallied up in early June, I'm not sure how valid or trusted the data could be. More than likely will should see volatility and perhaps a surprise on report day. Ultimately its all about the weather. Subsequent reports in late summer will be the bellwether for more sizable moves amid viable verified data. With one eye on weather reports, I'm also watching intently on two spreads that could offer clues on near term market direction for corn and beans.

Dec 19/Dec 20 corn. We have seen a major move for this spread from 36 cents Dec 19 under to 52 cents Dec 19 over Dec 20. A monster move of 88 cents or $4400.00 per 1 contract from early May. Today we settled at 38 cents Dec 19 over. A move under 33 cents (Dec 19 over) could push the spread down to 18 cents and then 7.4 cents, two Fibonacci retracements. A close over 52 cents Dec 19 over and its game on for corn again.

Second Spread is Nov 19 /Nov 20 soybeans. This spread has made a nice upturn from the early May lows at 61.2 cents Nov 19 under to this past Tuesdays high at 10.2 cents Nov 19 under. A 51 cent move or $2600 per contract. The spread moved lower today settling at 18 cents Nov 19 under. Key level and bottom of gap at 23 cents Nov 19 under. Should that not hold, I wouldn't be long beans. However should the spread settle over the recent highs at 10 cents under, I look for Nov 19 beans to make a move to parity versus the 2020 Nov contract and eventually move up to last years high of 25 cents Nov 19 over Nov 20. To me there is a chicken and an egg argument if the spreads prod the outrights or vice versa for future market direction.In any event they can verify to us that if today's break in grains is merely profit taking or the start of a deeper correction or reversal. Watch the aforementioned levels and lets see if support and resistance levels are held or violated. Those looking to enter or re-enter long corn for instance should pay attention to the spread levels here in my opinion. Call or email me at anytime for questions. 888 391 7894 or slusk@walshtrading.com

Every Thursday I hold a weekly grain and livestock webinar at 3 pm Central. We discuss supply, demand, weather, and the charts with speculative and hedge game plans. Sign Up Now



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About the author


Sean Lusk is a registered commodity broker and Director of the Commercial Hedging Division of Walsh Trading in Chicago. Sean began in the business as a runner on the trading floor during summer breaks from college in 1993. Upon his graduation from Southern Illinois University at Carbondale in 1996, Sean began his career on the trading floor of the Chicago Mercantile Exchange (CME). Overseeing billions of dollars of transactions working as a clerk in the Eurodollar pit, Sean took the next step and became a floor broker and member of the CME in 2003. He handled customer orders for banks and investment houses from all over the world from inside the Libor pit at the CME.

Now, at Walsh Trading, Sean utilizes his experience in the marketplace and his professional client service skills to aid and assist customers in their trading endeavors.  

He writes daily and weekly commentaries focusing on both the Precious Metals and Agricultural Markets along with related market activity.

Sean has been quoted in various media outlets discussing futures markets. 

These include:

 

  • Futures Magazine
  • Reuters
  • Forbes
  • Kitco
  • Nikkei Press
  • CCTV.com

 

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