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Bird Flu, World Starvation, Put Options, Rain Days Update 5/8/22


Bird flu is sweeping across the U.S. will soon be the country’s worst bird flu outbreak. More than 37 million chickens and turkeys have already been lost and more every day. That is a lot of corn and bean meal not going to be fed this spring.

Hungary and Slovakia refused to agree with the rest of the EU members to ban imports of Russian oil. The EU Charter states all members must agree 100% for an EU ban on imports or exports of anything to take effect.

Wayne Bacon is Hammersmith Marketing. At 80 years of age and a world grain trader, he has seen everything. Yesterday, in his weekly report to the world’s grain traders, he wrote:

Corn also was down last week due to faster spring planting in the US, but no one expects corn prices to go much lower ---- just too much demand for corn for both export markets and ethanol production.

The United Nations World Food Program (WFP) has warned yesterday that millions of people are "marching towards starvation" unless ports in Ukraine are reopened.

Millions of tons of Ukraine's grain is in silos and on ships in the ports, unable to be shipped with the new crop harvest just seven weeks away.

We expect the Biden Administration will use the starvation hot button and rising food prices as an excuse to engage US military forces in the war.

Tomorrow's futures contract delivery assignments on the May futures included soybean meal for the first time this month, 50 contracts. StoneX stopped all of them, likely for a user of bean meal (strong hands).


Weatheris 90% of market action for the next three months. Last evening's 6 to 10 day forecast:


Wheat Put Discussion

After the Close Friday May 6th.

September 2022 CBOT wheat futures settled at $11.09¾, up 2½ cents. All puts should have lost value since the futures price was higher.

The $10 put lost 1 3/8 cents while the $9.00 put lost 3 7/8 cents.

A short futures short position lost $125.

The $10 put lost $68.75

The $9 put lost $287.50.

The wheat in the field or bin gained about $125, because cash price = futures plus basis.

Note, one would expect the $10 put to lose more than the $9 put because the $10 put is a dollar closer to the futures price. On the chart below, you can see the $10 put’s delta is 0.29 whereas the $9 put’s delta is just 0.17. As we discussed a few weeks ago, the delta is the percentage of price change an option’s premium (value) is expected to change in relation to the underlying futures contract which, in this case, is the September 2022 CBOT wheat contract.


Rain Days Update

The Western Corn Belt has 4 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 6 more rain daysthan yesterday.


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