Was That the Seasonal High in Corn?
May 31, 2018
TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY 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.
Corn has been under pressure after making new yearly highs only a few trade sessions ago. The selloff in corn has been pretty fast and furious as the NASS crop conditions report showed a very strong start to the growing season and as the White house ignited trade fears with our number one corn buyer, Mexico. As corn clings to key support will it manage a recovery? Or is this the start of a larger selloff?
The USDA NASS crop conditions were released Tuesday afternoon due to the Memorial day holiday and showed that the corn crop was Rated 79% Good to Excellent. This represents the second highest initial rating of a corn crop that we had seen. The trade was expecting 72% G-E and corn prices had already started to sag in anticipation of a well rated crop.
Sign up for our Morning Ag Hedge newsletter! Sign up here: http://www.zaner.com/landing/ag_hedge_newsletter.asp
While the market was reeling with the stellar crop rating the White House threw another curve ball in the form of tariffs on Mexican, Canadian and EU steel and aluminum. This caused Mexico and Canada to retaliate with tariffs of their own. While there were a number of agricultural products named in the list of both countries tariffs corn and soybeans were spared, for now. Pork legs however were listed and this send hog prices sharply lower.
The corn and soybean market should not be without concern however. While Canada imports mainly fruits, vegetables and food products from the US Mexico is the largest buyer of US corn and the number 2 buyer of US soybeans and soybean products. This obviously could pose a big problem if trade wars escalate. It is a similar situation as with China where stiff tariffs on US corn and/or would cost Mexico dearly but it may be their biggest negotiating tool.
They're here! We have complimentary 2018 commodity reference calendars available. They are a little bigger than pocket sized and very useful if you follow markets. You can sign up for yours here - http://www.zaner.com/offers/calendar.asp (Shipping to the US only)
In my opinion the commodity funds had gotten very long and needed to scale back a bit. Crop conditions and trade concerns may have been the spark for that. End of the month profit taking may have also played a role. Going forward initial crop ratings have a fairly poor correlation with final yield and do not necessarily mean that this will be a stellar crop. In 2012 for example the initial crop ratings were 77% G-E and we all know what happened with that (huge decline in crop conditions to say the least).
Trade concerns may be the more real threat. If things were to escalate with Mexico in particular things could get ugly in a hurry no matter what the crop looks like. I would hope however that the US would treat a longtime ally and trade partner with a great degree of caution and respect. The two week weather forecast is also mostly favorable and may not provide concerns about crop conditions. Some of the long term forecasts are a bit more concerning however and we will see the extent of the interest the funds have in the longer term bet that the corn crop may suffer this year and that trade negotiations will not have a significant effect on US trade.
Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action. Ted Seifried - (312) 277-0113. Also, feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit. Find me on twitter - @thetedspread
July Corn Daily chart:
Producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!
Ted Seifried (312) 277-0113 or email@example.com
Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie
FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.