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The Greenrush Capital Report is a weekly commodity market newsletter, combined with intra-day trading alerts. Each report and alert consists of live trade recommendations for the global futures and options markets. Using futures, futures spreads and various option strategies, to help you to diversify your trading account by timeframe, technique, and market sector. Sign up today for this exclusive offer.

In response to the Bear Stearns bailout by the Fed, acclaimed hedge fund manager Jim Rogers says that "there aren't any 29 year old cotton farmers driving around in Maseratis." Well, give them some time - commodity grain markets have just started their first leg in this unprecedented climb into virgin territory. Soaring global food, feed and biofuel demand combined with record low grains stocks have impelled the grain sector to trade at or near record highs over most of the last few months.

Corn, soybeans, rice, wheat, oats and cotton have made amazing runs of late, mainly to the upside, as we head into this most important growing season since the last one. With some grain markets trading in line with their seasonal mid-spring tendencies, and in spite of the record high demand and record low stocks/use numbers, I believe that we will see a normal growing season, one consistent with prices falling into the late summer.

With improved seed and irrigation technology, farmers have more options than ever of what to plant and when. Combine this increased flexibility with normal weather and proper hedging, and US farmers can almost assure themselves record profits this year.

Things are good in the grain belt. Despite rising costs associated with growing crop, such as fertilizer, farm equipment and land prices, farmers are truly now reaping the benefits of their hard work and the timely commodity super cycle.

I talk with a lot of farmers, one of whom always reminds me to (and I quote, with slight modification due to the vulgarity of his language) "Never underestimate the ability of the US farmer to 'screw' things up". He insists that the 'Age of Aquarius' for American farmers will tend to turn sour abruptly because of their poor hedging practices, their worse spec trading, and their inability to maintain proper discipline in the face of rising crop prices.

Please farmers. Don't get all riled up -- don't shoot the messenger! This comment comes from a lifelong farmer's daddy, himself a lifelong farmer. I don't want you to start calling me up from your new Blackberry, yelling and spitting, as you line your fields from your state-of-the-art air conditioned planters, rolling on 22's, while watching CNBC on your laptop.

Yes, things ARE good in the grain belt.

While I remain a long-term grain bull, I am simply urging traders here to not underestimate the laws of supply and demand, and that agricultural markets are especially prone to sharp corrections during harvest. The big X-factor is, of course, weather. But like my old boss used to tell me "Drew, I'll bet on normal weather ever year". Every year, the crop gets in the ground. Every year it rains a bit too much in some places, and not enough in others. Every year the weather gets too hot and it gets too cold. Every year is the call for another biblical drought or flood. And every year the crop is harvested, for the most part, as expected or better. With genetically enhanced seeds and ultra speedy farm equipment, I would bet on yields only improving.

So what are the seasonal grain trades, ones that have been successful in the past, and are mostly dependent on normal Midwest weather? While I am aware that current supply and demand scenario is anything but 'normal', let's see what Mother Nature has to say about it. Here's what to play if the markets go normal.

All seasonal data was harvested using Time and Timing seasonal database created by my friend and client Stuart A. Johnston.

SEASONAL #1 - Sell September corn in mid-April. Look for the sell-off to abate in late April, and then pick up again in early June if weather remains reasonable.
TRADE IDEA - Synthetic short futures. Sell CU8 $7.00 call and buy a CU8 $5.00 put, collecting a credit of 17 cents ($850 / synthetic).
TARGET - Look for a move in the futures down to the 100 day moving average, and look to make about 50 cents on the trade ($2,500 / synthetic)
RISK - Theoretical unlimited risk, but I would exit the trade on a close in the spread below 36 under, looking to risk about 19 cents ($950 / synthetic).
NOTES: To try and take advantage of the enormous option implied volatility skew, and with September corn trading around $6, I would like to try this synthetic short, selling a September $7.00 call (for 34 cents) while buying a September $5.00 put (for 17 cents), and collecting about $850 per synthetic. Speculators continue to hype the long side of this market which is why the $7 call is trading at twice the price of the $5 put. The collection of this premium is crucial; it gives us a very large range in which the trade is profitable. As long as September corn is trading $7.15 or lower at expiration, this trade makes money.

SEASONAL #2 - Buy July Soymeal in mid-April and sell in mid/late June
TRADE IDEA - Bull Call Spread. Buy the SMN8 360-380 call spread for 600 pts ($600 / spread) or better.
TARGET - Target is for the spread to double between now and expiration.
RISK - Risk is limited to option premium and fees paid. Conservative traders should risk 50% of the value of the spread. Aggressive traders should buy back the short side of the spread on any correction.
NOTES: Beans tend to be strong from early April to early May, and the products are no exception, seasonally making large moves higher into summer solstice. We think we can see the meal take out, or at least approach the March highs over the next eight weeks. Once again we make a trade recommendation in light of the call option IV skew, and because of the seasonal strength as the trade approaches expiration. Alternatively, traders can take a look at bull spreading the beans either with a July-November spread, or use a bull spread in the soymeal, buying the July and selling the December.

SEASONAL #3 - Buy old crop beans, sell new crop corn, in a 1 by 2 ratio.
TRADE IDEA - Futures spread. Buy 1 July Soybeans, Sell 2 Dec Corn at 120 over.
TARGETS - Target #1 = 200 over; Target #2 = 271 over ($7,550 / spread)
RISK - Theoretically unlimited, and THIS IS A VERY VOLATILE SPREAD. Risk a weekly close below 76 over, or about $2,200 per spread.
NOTES - Yes, you need to have deep pockets to try and ride this spread, and you can see from the chart below that it can make erratic and significant gyrations. Nevertheless, this is simply a more direct way to trade the seasonal grain moves discussed above over the next 3 weeks. It has been historically noted that in this timeframe, the old crop bean markets tend to gain on the new crop corn, in the classic 1 by 2 ratio. This spread corrected significantly over the last few weeks, as USDA planting intentions were bullish for corn and bearish for beans.

SEASONAL #4 - Buy July wheat in early May and sell in early June.
NOTES - Monster crops are expected to be planted, while rumours of blight and UG99 virus continue to fester. The charts look terrible, at least in the short run, and we think it's possible that we could run as low as 760 basis the July, over the next month. Around that time, if the seasonal trends hold up, it might be time to get long July or September wheat. So let's trade the charts for now and see where it goes.

Seasonal trading ideas are not a suicide pact, one must be cautious as to the possibilities of outlier years.

Best of luck with all the markets, and as always, trade humble.

Risk Disclosure and Disclaimer:
The risk of loss in trading commodity futures and options can be substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose the full balance of your account. It is also possible to lose more than your initial deposit when trading futures and/or granting/writing options. As a result, selling/writing "naked" options exposes the seller/writer to the possibility of margin calls and virtually unlimited risk. All funds committed should be purely risk capital. Past performance is no assurance of future trading results. Seasonal tendencies are a composite of some of the most consistent commodity futures seasonals that have occured in the past. there are usually underlying, fundamental circumstances that occur annually that may cause the futures markets to react in a similar directional manner during a certain calendar year. Even if a seasonal tendency occurs in the future, it may not result in a profitable transaction as fees and the timing of the entry and liquidation may impact on the results. No representation is being made that any account has in the past, or will in the future, achieve profits using these recommendations. No representation is being made that price patterns will recur in the future. The contents of this e-mail communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to sell or a solicitation to buy any futures contract, option, security, or derivative including foreign exchange. The information is intended solely for the personal and confidential use of the recipient of this e-mail communication. If you are not the intended recipient, you are hereby notified that any use, dissemination, distribution or copying of this communication is strictly prohibited and you are requested to return this message to the sender immediately and delete all copies from your system. Privacy policy available upon request.

Drew Klein is Principal of Greenrush Capital Management LLC, an introducing brokerage outside of Los Angeles, California. Drew has been a member of the National Futures Association in good standing since 2001 and has worked for some of the largest options firms on the West Coast.

Greenrush specializes in managed accounts, full-service retail brokerage, and self-directed trading for the more sophisticated client. Drew is the editor of Greenrush Capital Research, which is available on a subscription basis but is complimentary to all clients trading with Greenrush Capital.

Drew is Series 3 and Series 30 licensed, and is a member of the Sigma Chi Fraternity, an organization whose trader hall-of-fame includes the legendary Larry Williams and Ed Seykota.

30-Day Complimentary Trial of the Greenrush Capital Report

The Greenrush Capital Report is a weekly commodity market newsletter, combined with intra-day trading alerts. Each report and alert consists of live trade recommendations for the global futures and options markets. Using futures, futures spreads and various option strategies, to help you to diversify your trading account by timeframe, technique, and market sector. Sign up today for this exclusive offer.