Buy December soybean oil when it fills today's gap
I am Stephen Davis, senior market strategist at Walsh Trading, Inc., Chicago, Illinois. You can reach me at 312-878-2391.
Soybean futures surged higher today after a biofuel announcement from the Environmental Protection Agency (EPA) yesterday. The announcement may have alleviated concerns about reduced demand for biofuel crops, leading to soybean futures reaching their highest level in almost three years.
The EPA announced 29 small refinery exemptions which cover 1.76 billion Renewable Identification Numbers (RINs). This decision allows these refineries to avoid certain blending mandates under the Renewable Fuel Standard. The total exempt volume was 1.76 million RINs. According to the announcement, 100% of the difference between projected and actual exempt totals will be reallocated into the 2026 and 2027 Renewable Volume Obligations (RVOs). The Renewable Fuel Standard, established by Congress, requires refiners and fuel importers to blend specified volumes of renewable fuels into the nation's transportation fuel supply or purchase credits known as renewable identification numbers, or RINs.
Global demand for U.S. soybeans to be delivered in 2026/2027 marketing year, which starts today, has increased in the past two weeks, according the United States Department of Agriculture (USDA) Foreign Agricultural Service reports. Today, following other purchases in August, China bought 6.0 million tonnes contracted for September to December.
Soybean futures showed no signs of pulling back and closed near today's highs. Soybean oil gapped higher overnight leaving the market comfortably above the 100-day moving average. In my opinion, the time to buy December 2026 soybean oil is when it goes down and fills the gap.
A trade strategy is to buy December 2026 soybean oil at 71.38 per contract, good till cancelled (GTC). Be patient with this entry. Markets are really good at going back and filling the gaps, in my opinion. Risk the trade 70.38 stop, GTC. That's a $600 risk per contract. Profit objective is 73.38, GTC. That's a $1,200 profit per contract.
To discuss trading strategies, contact me anytime. Have an excellent day.
Stephen Davis
Senior Market Strategist
Walsh Trading
Direct 312 878 2391
Toll Free 800 556 9411
sdavis@walshtrading.com
www.walshtrading.com
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