By Sean Lusk, Director of Walsh Commercial Hedging Services
312-957-8103 or 888-391-7894
Taking a look a closer look at corn, its numbers remain supportive.
Tuesday’s inspection report, a gauge of demand showed 45.7 million bushels were inspected to be shipped. Anything over 40 million bushels is bullish as it keeps corn exports ahead of USDA projections. Last month’s USDA crop report raised exports and lowered our ending stocks for the fifth consecutive month, showing a stronger demand pace and talk of lower stocks on the June report.
Monday’s planting progress came in at 88 percent complete versus 73 percent last week and right at the five-year average. Key Midwest producers read like this: Illinois 95%, Indiana 87%, Iowa 96%, Missouri 97%, and Nebraska 97%.
On next Tuesday’s crop progress report the national average should read over 95%. Then the psychology changes on weather. It's no longer weather and its impact on planting but weathers impact on emergence and eventual production.
Corn And Memorial Day
To date a warmer drier outlook meant a faster planting pace and lower prices. After this week, it’s bullish as timely rain is needed for good development. Seasonally corn turns up after the Memorial Day holiday. Support on September corn is 4.58 with resistance 4.90. Any move down towards 4.60 should be bought as that would be the worst case scenario before the crop is made.
The close for September corn came in on Tuesday came in at 4.66 1/4. For a longer term position trade I propose the following. If futures trade down to 4.60 basis September, look at buying the September Corn 520 call and sell the Sep Corn 600 call for a purchase price of 6 cents or a $300.00 risk. The maximum profit on the trade is $4,000.00, if both strikes finish in the money at the time of expiration minus the cost of the spread and all commissions and fees. The risk on the trade is the price paid for the option spread plus all, commissions and fees.
For those interested in grains, Walsh Tracing’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 pm central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. If you cannot attend live, a recording will be sent to your email upon signup.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.