BASIC & RECENT MARKET INFO

Tidbits Flash Sale: Yesterday, the USDA announced the sale of 115,000 mts of new crop corn to Colombia. Biofuel: The American Fuel & Petrochemical Manufacturers (AFPM) filed a lawsuit Friday in the D.C. Circuit court challenging the 2026-2027 Renewable Fuel Standard (RFS) volumes finalized by the EPA in March. The AFPM claims EPA’s “Set 2 rule” is the largest and most expensive RFS iteration in history and is the single most expensive regulation of President Trump’s second te

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 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

Tidbits The Federal Reserve voted 8 to 4 to hold the target interest rate at 3.5-3.75% for the third consecutive meeting, as expected. Energy markets are sharply higher today amid stalled Iranian peace talks and renewed threats of further military action. Crude oil has risen significantly, and soybean oil follows. U.S. crude inventories fell by 6.2 million barrels the past week, while the market expected it to be almost steady. Crude oil production rose a bit, while imports d

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

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

September CBOT wheat settled at $11.05 on 19 April 2022, down 18¼ cents. The previous day, that wheat futures price was up 22¼ cents, so the premiums of the puts were down on 18 April 2022. The lower futures price increased the value of all puts on the 19 April 2002. A put option gives the buyer the right to sell futures at a set futures price, aka the strike price . As the futures price moves lower, every put option increases in value. The September 2022 $10 put gained $237

This is the third installment of a series of educational explanations about put options. Even though most of you do not grow wheat, you can enhance your marketing profits by learning how put options work and what they can do for you. Now is the time to expand your understanding of marketing tools before the 2026 growing season for corn and beans. In January 2022, we had clients with July 2022 HTA wheat contracts a little above $8. Because of Russia’s invasion of Ukraine on 24

Written 22 April 2022 In lesson 1, I wrote about clients who bought September wheat puts with September wheat futures right at $11.00. People were paying 60¢ per bushel for the right to sell September wheat futures at $10.00 and 20¢ for the right to sell September wheat at $9.00. Why would anybody pay so much money for the right to sell September wheat $1 and $2 below the current price? Why not just sell the September wheat futures at $11.00 and not spend $2,943.75 for the ri

Last week, (third week in April 2022), we recommended our clients purchase September Soft Red Winter Wheat Put Options and most likely within the next two and half months, we will be recommending the purchase of December corn puts and November soybeans puts. We will present a series of educational explanations about put options. Even though most of you do not grow wheat, you need to understand how put options work and what they can do for you. The wheat market is “ripe” for

Tidbits How will the markets react to the attack on Iran? Logically, one would expect crude oil to trade higher. There will be fools buying crude oil futures on the opening this evening. They don't realize traders have already Bought the Rumor (U.S. will attack Iran) and those same traders Will Sell the Fact (U.S. did attack Iran). The only reason crude oil would maintain its $12 gain since mid-December is if the insurance companies refuse to insure ships sailing to and from

Wheat & Put Options On 27 May 2022, September Soft Red Winter Wheat futures settled at $11.66 after trading to $12.85 on 17 May. Here is the daily price chart for September 2022 CBOT wheat June through August 2022: On 27 May 2022, September Soft Red Winter Wheat futures settled at $11.66 after trading to $12.85 on 17 May. Here is the daily price chart for September 2022 CBOT wheat June through August 2022:

Highlights Between October and January are the traditional months the U.S. dominates sourcing soybeans to China. However, this marketing year, 46% were from Brazil, up from 29% two years earlier. The two primary reasons are Brazil’s soybean production and storage capacity is growing faster than Chinese demand for soybeans and the U.S. and China trade and political relationships have been in down-trend ever since Biden refused to reduce or remove Trump’s tariffs on most Chines