Soybeans May Be More Plentiful Than Anticipated, Analyst Says

The grain markets have seen significant strength in recent times, with new highs being reached regularly. Rich Moran of Walsh Trading attributes this to negative news from farmers regarding their corn and wheat crops. He suggests that soybeans may be more plentiful than anticipated due to factors such as the availability of fertilizer being disrupted by the war with Iran over the Strait of Hormuz.

Moran notes that it takes less fertilizer to grow soybeans than corn, which may have led to increased acreage being substituted with soybeans instead of corn. Additionally, cotton growers have been substituting acres of cotton with soybeans in an attempt to keep the supply of cotton lower and strengthen its price.

The price of a soybean contract is very close to the combined price of a corn contract and a wheat contract, settling at -20½ cents for MAR Soybeans (ZSH27) minus the combined price of MAR Corn (ZCH27) and MAR Wheat (ZWH27). Moran believes that if this spread package stays below both its 14-day and 21-day averages, it could continue to go lower.

He recommends selling this spread at -15 cents, leaving a resting order in place. If successful, traders can risk $1,250 to make $2,250 per spread, plus fees and commissions.