Russia .. wheat

[furrowtickler]

Now that Putin seems to be advancing onto Ukrainian soil financial markets down , wheat up ?
I see it’s up a bit tonight

[WiltonRanch]

Russia Ukraine grow a lot of lower quality wheat but still account for close to 30% of world production. Don’t imagine much farming gets done if you’re trying to avoid getting shot.

[FarmJunkie]

Gonna be interesting the next few months with sleepy Joe directing traffic in the Ukraine. If the Ukraine can’t produce as much crop will definitely effect prices.

[furrowtickler]

Producing a crop may be a challenge yup , but it’s the shipping from that said area that will be the issue if it escalates too far for that whole region

[FarmJunkie]

I think prices are gonna get interesting simply to buy acres Furrow. Have had buyers calling about prices, more so about specialty crops and how many acres we are planning to grow. Trying to buy our love.

[fjlip]

Larry says that spring planting is going on in Ukraine and south Russia...

[BTO780]

Maybe $15 isn’t a pipe dream after all?
I should throw $15 target in see what the crooks think of that.

[TOM4CWB]

Maybe $15 isn’t a pipe dream after all?
I should throw $15 target in see what the crooks think of that.

Sell a $10.20 Dec 22 Spring wheat call at .75
Buy a $9.50 Dec Put Spring wheat pit at .97... ???

Basis now is $1.75 over for October Spring Wheat? $11 spring wheat for October?

A thought if this goes much higher?

[LWeber]

Russia Ukraine grow a lot of lower quality wheat but still account for close to 30% of world production.

Don't think like the CWB did

Quality of Russian wheat of 2021 harvest record high over the recent years - Quality of Russian wheat of the harvest-2021 is the record high over the last years, declared Irina Zaychenko, deputy general director of Federal State-Funded Institution «Federal Centre of Quality and Safety Assurance for Grain». “Food wheat production amounted to 65.5 mln tonnes in Russia in 2021, out of the total harvest of 76 mln tonnes (according to Rosstat data). It is the largest food wheat crop in recent years. For example, in 2017, wheat production reached record 86 mln tonnes that included about 58 mln tonnes of food wheat”, – she said. She added that the share of wheat with protein higher than 13.5% increased. “We have the maximal volume of such wheat – 37 mln tonnes. The volume of wheat with the protein content higher than 12.5% totaled 59 mln tonnes” – the expert said. I. Zaychenko told that the volume of feed wheat decreased sizably to 9.7 mln tonnes or 12.9% of the overall production. It is the lowest figure over the last 20 years. (APK)

[TechAnalyst]

Sell a $10.20 Dec 22 Spring wheat call at .75
Buy a $9.50 Dec Put Spring wheat pit at .97... ???

Basis now is $1.75 over for October Spring Wheat? $11 spring wheat for October?

A thought if this goes much higher?

Short answer, I would strongly recommend against it (without purchasing a way out of the money call to put a limit on risk and potential margin calls).

I would suggest spending the .22/bu on a Dec 22 $8.00 spring wheat put for a minimum price guarantee with unlimited upside potential and risk limited to the purchase price.

That would give you $8 - .22 + 1.75 = $9.53 as a minimum price. Should prices end up exactly here ($9.55) next fall you would get $9.55 - .22 + 1.75 = $11.08/bu.

If prices rally $5/bu to levels seen in 07/08 (CBT), you would be $14.55 - .22 + 1.75 = $16.08 vs $11.70 and the significant margin call stress of your consideration.

If prices rally to the $24.26/bu high that MWE put in in '08, you would be $24.26 - .22 + 1.75 = $25.79/bu vs the $11.07 and the severe margin call stress of your question.

Longer answer, that is a great strategy if your outlook is for a topping market with little upside potential and enough downside risk you want at the money put option protection, almost as good as forward contracts without the delivery risk.

In this case, I would argue the opposite with enough drought risk worldwide to support prices. On the other hand, there is significant upside price risk with the possibilityof losing supplies from Russia and the Ukraine.

The two countries are predicted to export nearly 60 MMT of wheat in 21/22 combined out of just over 200 MMT of world exports. Corn is slightly less at 37 MMT out of just over 200 MMT. How will the market react if Western Allies are forced to try to block those exports?

If shorting futures as a hedge or selling calls to help pay for puts, I would definitely have a plan in place of how to deal with a significant rally.