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Commentary

Beans closed moderately lower, dragged down by weakness in bean oil. Soy oil prices fell more than 2% today, reflecting disappointment that the U.S. Environmental Protection Agency again kicked the can down the road in finalizing biofuel policy in my opinion. The industry hoped to get final clarity on small refinery exemptions. However, the EPA is now requesting comments for another 45 days, which in my view means that the EPA is no closer to finalizing biofuel policy than it was in June. Look for a potential unwind in the oil share trade. In other news, and this was no surprise, the FOMC lowered rates this afternoon by 0.25%. Traders are waiting for the Trump/Xi call on Friday and whether ag products, specifically beans, may be mentioned in the discussions. If not, the market may be disappointed, and prices could come under pressure after the meeting. Expect both sides to say it went well but specifics will be needed to get traders optimistic enough to push prices through the August highs. For a trade idea, look at cheap meal calls. It’s likely we won’t be receiving any meaningful guidance on biofuel policy until 2026, which is a kick in the gut for those long oil and short meal. Heading into winter is where meal sees better demand as end users seek coverage for a long winter. I see bean yields dropping as late drought in the East is taking the top off this bean crop. As we enter into month and quarter end. Funds still short 100K in meal approximately. Trade idea below. 

Trade Ideas

Futures-N/A

Options-Buy the March 2026 soymeal 330 call at 3 points or $300 plus commissions and fees. 

Risk/Reward

Futures-N/A

Options-The risk is the price paid ($300) plus trade costs and fees. Work an order to exit a $20.00, for a 2K collection less trade costs and fees. 

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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