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Still Waiting

Agriculture.com Staff 06/25/2009 @ 3:13pm

The ag markets are still waiting for the USDA reports on Tuesday morning. It seems like market participants have been focusing on this upcoming mountain of data for a long time.

With the completion of the main planting season and the commencement of summer (finally hot) weather, the acreage and stocks data will provide a long term base for market opinions and trading strategies for the rest of the growing season. Any surprises will affect prices for much more than one day.

Soybean Volatility

The soybean market seems to be never quite satisfied. Old crop exports were virtually non-existent today. So the market focuses on strong meal exports. The Census crush report was a little bearish today. The market instead focuses on tight cash supplies. Oh, and by the way, the Census soybean meal stocks were quite large. Not a factor!

So the market seems to be picking and choosing on a daily basis what it finds most important. Today, anything that sustained the bull spread (long July beans/short November beans, for example) was viewed as a valuable piece of information.

Tomorrow the July options will expire. For soybeans, will futures be above or below the $12 strike price? This has been a strike price that has attracted a lot of attention and trade, so wild swings in July futures are likely as option traders even up and position themselves for expiration/exercise.

On Friday, there is always a certain amount of squaring up of positions and reduction of risk that takes place. Option expiration makes that more important. For example, option traders who sold $12.00 calls (they would be short July futures if prices settle over $12.00) will make sure they are long an appropriate amount of futures to offset their risk.

The ag markets are still waiting for the USDA reports on Tuesday morning. It seems like market participants have been focusing on this upcoming mountain of data for a long time.

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