Grain Marketing Education, News & Strategies

Tidbits The NOPA soybean crush in June was 214.34 million bushels of soybeans, up 2.7% from May and up 15.7% from a year ago. It exceeded trade expectations as the daily pace of processing rebounded from an eight-month low posted in May to the strongest level in three months. You can learn about the NOPA via the link: https://www.wrightonthemarket.com/post/about-the-nopa The USDA is now accepting applications for its Agribusiness Trade Mission to Vietnam on November 9-12. Vie

This is a continuation of articles about the use of put options on commodity futures as a primary marketing tool to lock-in a minimum price or as a price “enhancer” of forward contracts or HTA contracts. Here in August, we have been discussing the process to maximize the income from the sale of a previously purchased put option. Since put options increase in value as the futures price declines, the first objective to maximize put income is to sell the put when the underlying

This a continuation of weekly articles about the use of put options on commodity futures as a primary marketing tool to lock-in a minimum price or as a price “enhancer” of forward contracts or HTA contracts. This article discusses the process to maximize the income from the sale of a put option. Since put options increase in value as the futures contract price declines, the first objective to maximize put income is to sell the put when the underlying futures contract price is

Tidbits Baker Hughes reported there were 563 oil and gas drilling rigs in operation last week in the USA. That is 1 more than last week and 9 more than a year ago. Canada had 186 rigs drilling this past week, 6 more than the previous week and 47 more than a year ago! CGB at Gladstone Bluff, Illinois (on The River) Friday evening compared to last week: Corn spot delivery: -16N (16 under July), 2¢ weaker = $4.02 Fall delivery: -32Z (32 under December), steady = $4.12 Soybean

This article continues the discussion of how to use put options to make more profit through better marketing. Previous articles were educational of what are commodity options, how their values change in relation to the under lying futures contract, how put options can be used as the primary grain marketing tool or as a secondary marketing tool to add value to a HTA or forward contract. This week, we shift to the process of how to liquidate the put option position at optimum v

Tidbits Flash sale: Yesterday morning, the USDA announced the sale of: 225,000 mts of old crop corn and 268,700 mts of new crop corn to Mexico 50,000 mts of old crop corn and 60,000 mts of new crop corn to unknown 117,000 mts of old crop soybean cake and 135,000 mts of new crop cake and meal to unknown The S&P 500 gained 0.4% this week, extending its winning streak to eight consecutive weeks, the longest since December 2023, while the Dow Jones added 294 points to reach an

Tidbits In hindsight, it is obvious the market was way too optimistic about what Trump’s visit to China was going to produce in the way of good news for corn and soybeans. Too many AI traders have no experience in doing business with China! What we do not like is yesterday’s low in December corn was lower than the previous correction low, which negates the higher high made earlier in the week. Officially, the price trend is now sideways, not up. The low yesterday on Novembe

In this series of put lessons, we have four example farmers using different combinations of marketing tools to price their 2022 wheat: Dan contracted 5,000 bushels of wheat at $11.00 on a HTA and bought the $9 and $10 puts for 29¢ each. Joe contracted 5,000 bushels of wheat at $11.00 on a HTA and bought the $10 and $11 puts for 59¢ each. Don did not sell the futures or HTA, but bought a $9 put for 29¢ and then, when the futures gained a dollar, he bought a $10 put for 29¢. Ju

CBOT September 2022 wheat was up 45½¢ the week ending July 8th. Since the futures price was up, the puts with strike prices within a few dollars of the futures price decreased in value. Why? The higher the futures price moves, the less value a put has because a put gives its owner the right to sell something and if the price of that something increases, the value of selling it at fixed strike price diminishes. For example, on July 1st, September wheat settled at $8.46. The $9

Last week’s comments compared put option value changes with the price change of the underlying futures contract over a four-week period. The obvious conclusion was a futures hedge position would make or lose money faster than an option, but an option would never require a farmer to make a margin call. We recommend the HTA or Forward contract as the primary pricing tool and the puts as a secondary marketing tool to add value to the HTA. The week ending last, Friday (July 1st),

Very few people understand the relationship between the price change of a futures contract and the resulting price change of its options. For the past ten weeks, we explained how the daily price change of the 2022 September CBOT wheat futures contract impacted the value of its $9.00 and $10.00 put options. Now that we have explained the option vocabulary, the concept of options on futures contracts and a detailed day by day explanation of price action, now we will accelerate

Tidbits Brazil: Weekend comments from AgrInvest Commodities: Weather models have reduced expectations for widespread rainfall in Goiás and Minas Gerais, while concerns are growing about possible frosts in southern Brazil over the weekend, especially in areas growing second-crop corn in Paraná. In the physical market, Goiás is expected to register lower production, while domestic consumption continues to advance with the expansion of corn ethanol, reducing Brazil's export pote

Tidbits Corn, beans, and wheat were smartly lower for the second consecutive day yesterday primarily because crude oil was sharply lower. June futures contract was down as much as $13.61 and finished down $7.19. Lower crude prices mean lower gasoline and diesel prices, reducing the value of biofuel blending stock. However, lower fuel prices are good for the economy. A strong economy will increase demand for fuel and everything else, like livestock that eat feed and all the co

Use Puts with HTA of Forward Contract to Increase Income On Aril 27th, 2022, September 2022 wheat settled at $10.89¾, down 2¾¢. The $10 September put settled at 49½¢, up 2 5/8¢. With the price change in the both futures and the put option at 2+¢, one would think the delta was near 1, which does happen when an option is very deep in-the-money. But the $10 put is not in-the-money at all; at today’s close, the $10 put was 89¾¢ out-of-the-money with a delta of .32, as you can see

How to Calculate Time Value of an Option The last put discussion ended with the question, “Was the $11 September wheat put out-of-the-money or in-the-money on the close of business Monday, April 25th with September wheat at $10.71¼?” To determine if the $11 put was in-the-money or out-of-the-money, you ask yourself: If that put option is exercised (exchanged for futures position), would the resulting futures position have a profit or a loss? A put with a strike price of $11.0

What is Time Value of an Option? This is the eighth essay discussing how to use put options to enhance your grain marketing was written after the close Monday, April 25, 2022. For the second day in a row, September 2022 CBOT wheat settled 2 cents lower today, at $10.71¼. Also, for the second day in a row, the September $10 and $9 puts lost value. The $10 put lost 5 cents and the $9 put lost 1 3/8 cents. As you should already know, puts are supposed to increase in value w

Tidbits Iran: The two week cease fire between Iran versus Israel and the U.S. is very fragile and most likely will collapse. Iran claims Israel has already broken the agreement. Many countries claim Iran has also broken the agreement. The Strait of Hormuz remained shut to vessels sailing without a permit and shippers said they needed more clarity before resuming transit. Marine Traffic data ⁠showed two Greek-owned and two Chinese-owned bulk carriers passed through the strait

Use Puts to Lock-in a Floor Price or to Enhance the HTA Price? This seventh essay discussing how to use options to enhance your grain marketing was written Saturday, April 23, 2022. When the futures market opens Sunday evening, you can spend 30 cents a bushel for the right to lock-in a HTA price for your corn at $6.40 on December futures. December corn futures settled at $7.24 yesterday. If a corn farmer buys corn puts to lock in a floor price for his corn, does he want thos

On April 21st, 2022, September 2022 CBOT wheat futures settled 20 cents lower at $10.75¼. The $10 September wheat put option premium should have increased 6½ cents (delta times 20 cents). However, it increased about half that much. See the price chart below. The $9 September put premium should have increased by a little more than 3½ cents (delta times 20 cents), but it lost a quarter cent! Clearly, the option traders are bullish wheat and many traders realized that the big

When Does A Put Option Have No Potential Value? Lesson 4 option lesson ended with the question, if September wheat went to $25 in June, when would the September $10 put options have no value? Was it when the $10 put become worthless? Meaning the option could not be sold because no one would pay even a fraction of a cent for it? No. Was it when the wheat futures hit $25? No. No matter how high futures price goes, all put options will be “alive” until the end the lasty trading