The December WASDE Eve: Agriculture Trade Ideas

“The S&P 500 and the Dow hit record highs today due to positive COVID vaccine news and hopes economic stimulus is on its way from congress,” reports Daniels Trading Senior Commodities Broker Craig Turner, author of Turner’s Take newsletter, and the host of Turner’s Take podcast. “The stimulus would be a short term boost for Q1 in 2021 while the vaccine is bullish for Q2 and going forward.  2021 should be positive for the equity and commodity markets as growth comes back to the US and global economy.”

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q3 2020 hedge fund letters, conferences and more

Big Changes Exptected For Corn And Soybeans In The Dec WASDE

The USDA’s December WASDE is tomorrow.  The USDA rarely makes big changes to corn and soybeans in the Dec WASDE.  The December report tends to have minor adjustments and any big changes come in the January report.”

Alluvial Fund NovemberAlluvial Fund’s performance update for the month ended November 30, 2020. Q3 2020 hedge fund letters, conferences and more Dear Partners and Colleagues, Alluvial Fund, LP returned 13.1% in November, compared to 18.4% for the Russell 2000 and 15.4% for the MSCI World Small+MicroCap. Year-to-date, Alluvial has returned 22.7% versus 10 . . . SORRY! This Read More

“If there are any surprises I’m guessing it would be for soybean exports.  The USDA did not adjust exports in the last report and there is ample evidence in the Export Sales and Inspections reports to suggest a 25mm to 50mm increase. That could decrease ending stocks by the same amount.  I can also see the USDA taking a pass and updating export in January.”

“I don’t think corn is going to change much either.  We could see demand go up a little but South American weather probably has more impact on the CBOT than the WASDE tomorrow.  As long as there are no surprises we think the market gets back to trading weather by the close.”

Short And Long Term Trade Ideas

“As for the report tomorrow, I have two trade ideas. 

1) Short Term (Weekly Option Puts) – The surprise risk is to the downside.  The market is very long and if stocks actually go up the market will be caught off-guard big time. The classic “USDA Curveball” trade tomorrow is short dated soybean puts.  The $11.50 Soybean puts that expire on Friday, Dec 11 are about 5 cents.  I don’t think the report will be bearish but I’ve been shocked by the USDA before. The biggest surprise tomorrow imaginable would be soybean stocks getting larger.”

“2) Longer Term (March Calls) – Regardless of what happens tomorrow I think stocks do get tighter in the US due to strong export demand. I also think there is a very good change South American soybean production this year will be below the trend averages.  If US soybean ending stocks do go to 150mm or 100mm bushels, then you can make the case for “beans in the teens” and that means $14.  The March $13 Soybean Call is 12 cents.  It is a big of a home run trade but if I am going to take a flier on something over the next few months it is soybeans.  If ending stocks estimates get to 150mm to 100mm in January or February that is a 3% to 2% stock/usage ratio and argues for prices at $14/bushel.”

Comments are closed.