Grain Spreads: Lock in 4.50 Corn
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USDA inspected 59.9 million bushels of corn for export in the week ending July 24, a sharp rebound from the week prior and coming in above even the top-end trade estimate of 55.1 million. Japan and Mexico were the featured destinations, with the two combining to account for most of the week’s shipments. However, the market is supply-side driven with weather ruling the price action in my view. Favorable precipitation forecasts continue with rainfall negating any high temperature concerns, particularly in the Eastern Corn Belt. A flash sale this morning showed 225,000 metric tons of corn for delivery to Mexico during the 2025/2026 marketing year. There was also a sale of 229,000 metric tons of corn for delivery to unknown destinations. Of the total, 35,000 metric tons is for delivery during the 2024/2025 marketing year, and 194,000 metric tons is for delivery during the 2025/2026 marketing year. From a demand standpoint the inspections and flash sales are encouraging, but in my opinion much more maybe needed to offset the monster corn crop that maybe potentially coming. Not much has changed weather wise for the grain markets heading into the last week of July; there will be a couple more days of 95 plus degree temperatures here in the heart of the corn belt, but temperatures are forecasted to flip to below-normal later this week and into the first week of August, Widespread rains fell in the central and eastern corn belt over the weekend and plenty more is expected this week. If you have unpriced bushels, consider the following trade that locks in 4.50 March 2026 corn.
Trade Idea
Futures-N/A
Options-=Buy the March 26 450 puts and sell the March 390/450 call spread. Buy the 3-way option spread for a 1 cent collection ($50) less commissions and fees.
Risk/Reward
Futures-N/A
Options-The maximum risk here after a 1 cent collection is 59 cents ($2950) plus trade costs and fees. If weather holds through August/September with timely rains absent of heat, there are whispers that the national yield could hit 186 to 187. That’s 5 to 6 bushels per acre higher from the early summer projection at 181. In my opinion that would swell ending stocks to at least 2.1/2.2 billion from 1.66 billion currently. We could see prices retreat if those types of yields are realized into harvest down to last year's lows at 3.85. This strategy is devised for corn grower/producers.
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Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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