Apr 18, 2014
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EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

Sub $4 Corn Next Week?

Nov 18, 2013

Corn prices fell to new lows for the move on Monday from ongoing supply pressure and stop hunting.  We talked last week about the large amount of put option open interest still out there in the December contract.  As the futures get below some of the key strike levels, the option writers tend to "cover" those puts by selling futures.  This process is self-fulfilling and can lead to further weakness.  To see a full list of the December option open interest from $4.00 - $4.50, see the table below.

Option Open Interest                                          

Meanwhile harvest is wrapping up quickly as we are now 91% complete for corn and 95% for soybeans.  Winter wheat is 89% emerged and the conditions are solid at 63% good-excellent.  On Friday the EPA proposed its 2014 bio-fuels mandate.  The move would lower the ethanol mandate to near 13.0 billion gallons in 2014, well below what the original mandate called for and approximately 800 million gallons less than in 2013.  This proposal was leaked during the government shutdown last month and should have already been priced into the market.  However, the recent weakness is noticeable and the EPA’s announcement could have had a negative psychological effect on an already fragile market.  A while back we talked about the contract low of $3.98 ¼ being a heavy target for December corn before contract expiration.  This is still a target and we are well within range of that with less than 2 weeks until First Notice Day.

December 2013

 December 2013 Corn

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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.


 

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