Options Play: Is the switch on?

April 8, 2016 10:37 AM

Will farmers switch from corn to soybeans because ofwWeather conditions?

Fundamentally, according to the USDA report, corn stocks are up about 1% year-over-year and that puts the number at 2.8 billion bushels of corn. If the number of 96.3 million acres holds up at 169 bushels per acre we could be looking at the biggest corn crop since the 2004/05 season, which I believe was the last El Niño, La Niña year. That's a glut and it could be priced in. Or not.

What could change this big number is the weather. If crop progress is hindered, we could see farmers switch from corn to beans. And if farmers here in the U.S. plant more soybeans than intended, coupled with the fact that there are some huge supplies out of Brazil, we could see a glut of soybeans. This could be priced in to the bean market. Or not.

One thing is for sure ahead of this year’s planting season is that nothing is for sure. Look out for a weather market and get ready to pull the trigger because we will have a bumper crop of uncertainty.

Click here for Options on beans for people who don't know beans about options.

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About the Author

Matt McKinney is a full-service options broker at Zaner Group both buying and selling energies, metals, grains, softs, currencies and the 30-year bond market. My strategies include time frames of 45-120 days with the ability to liquidate at any time. I can be reached at mmckinney@zaner.com.

Whether you're a novice trader who wants to participate in options on futures or an experienced trader, you can also check out my blog at http://www.mmckinneyfutures.com/.