SpreadEdge Capital specializes in seasonal spread trading across a wide variety of commodity markets. A spread trade is the simultaneous purchase and sale of the same commodity with different delivery dates or of related commodities with the same or different delivery dates. SpreadEdge publishes a weekly Newsletter that provides several seasonal spread trade opportunities every week. Below is an overview of the Market Outlook for next week for the various Ag markets along with my favorite spread trades.

COT (Commitment of Traders)

Friday’s COT report showed a 12k net longs increase for Non-Commercial traders and a 26k net longs increase for Managed Money.  Funds added longs in Corn, Wheat, Live Cattle, Lean Hogs, and Cocoa.  Funds reduced many longs in Soybeans, Soybean Meal, Soybean Oil, and Cotton.

Macros are more positive for Ags this week:

Positive

•Chinese yuan set a new 3-year high

•Emerging market stocks are rallying

•Crude Oil is holding gains

Negative

•Inflation expectations are lower

Relative Positioning

Lean Hogs, Coffee, and Robusta Coffee continue to be the most “Expensive and Overbought” markets comparing the front month versus prices over the past 24 months.   Cocoa is the only market in the “Cheap and Oversold” quadrant.

Technical Analysis

Coffee (shown below) was the strongest market for the week.  Soybean Meal and KC Wheat were the weakest markets for the week despite a small gain in ADX points.  There was little change in the total Ag ADX scores

Seasonality

From a pure “seasonality” perspective, Sugar and White Sugar have the most historical strength, while Corn, Soybean Meal, Coffee, and Lean Hogs are the weakest for this trading week (based on historical data over the past 15 years and a proprietary scoring function).

Spread Trades for Next Week

Based on all of these factors, my favorite spread trades for next week are a long Soybean, short Soybean Oil inter-commodity spread, and a long Sugar calendar spread.  Below are the spread charts:

The SpreadEdge Weekly Newsletter is up $101,743 with a 55.3%-win rate since April 2019 (as of 5/28/2021). For specific details and a free copy of the Weekly Newsletter, please send an email to info@SpreadEdgeCapital.com 

Darren Carlat

SpreadEdge Capital, LLC

(214) 636-3133

Darren@SpreadEdgeCapital.com

www.SpreadEdgeCapital.com

SpreadEdge Capital, LLC is registered as a Commodity Trading Advisor with the Commodity Futures Trading Commission and is an NFA member. Past performance is not indicative of future results. Futures trading is not suitable for all investors, The risk associated with futures trading is substantial. Only risk capital should be used for these investments because you can lose more than your original investment. This is not a solicitation.