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Highlights, Put Options, Markets & Rain Days Update 5/31/22

Highlights


The EU has agreed to ban imports of Russian crude oil EXCEPT by pipeline. Hungary refused to accept pipeline embargo of Russian crude. About one third of the EU's Russian crude comes via pipeline.


Both the EU and US weather models predict nice precipitation for France’s heat and dry suffering wheat crop. France is the EU's #1 wheat exporter.


First wheat harvest yield report from Texas: 6 bushels per acre; remember, hot and dry weather means the poorest crop is harvested first.


SovEcon (Andrey Sizov) revised crop estimates for Ukraine primarily due to revised acres:

  • Corn crop increased by 1.2 million mt to 27.0 million mt with additional 200,000 hectares to over 4 million hectares. USDA is at 3.5 million hectares.

  • Wheat crop down by 900,000 mt to 22.2 million mt. In the short run, it does not matter as Ukraine is exporting very little wheat by train.


 

Wheat Put Discussion

After the Close Friday May 27th.

After tracking the September wheat puts daily for 6 weeks, on May 20th we went to a weekly update as of the close of business on Friday. This is the first weekly report.


Note that when an option contract, in this case September CBOT wheat, reaches its last three months of life (before expiration) the number of strike prices are doubled. For September wheat, instead of the strike prices being ten cents apart, now they are five cents apart, so we had to change the put chart to include the $9, $10 and $11 put strike prices by cutting out 11 strike prices between $9.40 amd $10 as well as another 11 between $10.40 amd $11.


September 2022 CBOT wheat futures settled at $11.66¼, down 8¼ cents from the previous Friday. All puts should have increased in value since the futures price was down slightly, but the loss of one week of time value and less volatility would have reduced the value of the out-of-the-money options.


The September 2022 options will expire August 26th. Each week the futures price remains above the strike price of the puts, from May 20th, each put will lose one-fourteenth of its time value.


Theoretically, this past week:

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