I bought on the last few weeks NOV14 puts around current levels. I am really bearish on this market. Pros : Record US harvest incoming Likely record planting in south america Ratio of stock bean on utilisation is sharply higher in US (and just higher on world basis) Ratio soy/corn on high level both on 2014 and 2015 harvest US farmers will most likely sell their beans first to cover their costs because they dont like to sell under their producing costs and because corn contango is so high that you want to stock your corn Cons : Half of the world harvest is in south america which far from being done (and planted) Chinese likes meat ;=)
I don't disagree with any of the points above. As for the soy/corn ratio, historically in the 2.5 to 2.6:1 range, that's out of whack and between now and the US planting season will be the subject of a lot of market chatter. Because of high yields, high livestock prices, and the various insurance plans, net farm income is not expected to tumble as much as you might think in calendar year 2014. 2015 is a different story and barring South American crop problems, the US farmer might be faced with both corn and soybean prices below the cost of production for the first time in several years. New crop futures prices during Feb 2015 will be important, as that time period is used to establish a price floor (or part of the floor ... it's complicated and I don't understand all of it) for the revenue assurance (crop insurance) plans. It's a good time to be a livestock producer, but if you're just a cash grain farmer, you and your local tractor dealer are going to be feeling some pain. The most recent agricultural price activity that has me scratching my head: sugar and wheat. Both have surprised me with their weakness. Good time to be a producer of junk food cereal for kids.
I fully agree with you. But the classic soy/corn ration is not 2.5/2.6 but between 2.2 - 2.4. Corn yield increased more than soy yield in US so the classic corn ratio should be higher nowadays. Wheat is kind of heavy so its weakness is not too much a surprise for me. And russia and ukraine are selling so much this year that it depresse the market.