Summer weather rallies in grains are often (but not always) great call selling opportunities for those that know true grain fundamentals.
Weather attracts news coverage which brings out the amateurs and fortune seekers. But weather rallies are often (but not always) overblown and thus markets can overprice what often turns out to be a somewhat benign event.
The current situation in soybeans may be such an event. In fact, soybeans could be setting up as an ideal situation for call sellers. It’s a wet weather rally (as opposed to dry or hot), it comes in the face of an otherwise bearish (if not very bearish) supply situation, and it arrives at a nearly perfect time of year.
While the weather bulls have driven soybeans to rally by $1.40 per bushel from mid-June to mid-July, the fundamentals don’t seem to support such a rally. If this is indeed baseless speculation, history suggests it won’t end well for the bulls.
While beans have since retraced some of their July gains, we feel the clock is running out for bean bulls and that further upside will be limited. This sets up a potential opportunity for call sellers as harvest approaches in September.
Below you’ll find a look at the real soybean fundamentals and suggests a course of action for astute traders.
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