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.
After 4 days higher in a row December corn is now challenging the 20-day moving average for the first time since closing below it on May 29th. Corn also has not seen 4 consecutive higher days since late May. The market may be scaling back on ideas of massive production as crop conditions have declined slightly in recent weeks. However, with cooler temps in the forecast and rain in the near term outlook can corn build on the 15 cent rally off lows?
Corn conditions have backed off to 72% Good to Excellent down from the 79% high for the week ending May 27th. This is still a very well rated crop at this point, but the recent decline may have some traders second guessing the massive yields that had seemed to be getting factored into the market. What may be more concerning (or at least confusing) is the speed that this crop is progressing.
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For the week ending July 15th corn was 63% silking compared to 37% last year at this time and a 37% 5-year average for the same time frame. This means that the corn crop is 2, maybe 3 weeks ahead of normal pace. This could be good or bad. Looking at comparison years we find mixed results. However, heat is the main reason for corn crops to push faster than normal. The last few years we have enjoyed mild Augusts into September extending the growing season and adding significant test weight to corn and helping to achieve record yields. If the hear hangs around this year corn may not have a chance to finish as well as the last few years.
The current forecast calls for a significant amount of rain in the July 19-23 time frame. Also, both the 6-10 and 8-14 day outlooks are suggesting below normal temps. This may give the corn crop a chance to slow down a little. But, it does look like the heat could come back. The NOAA released their outlook for August on 7/19 and the long term forecast is calling for above normal temps again for the majority of the Midwest.
In the longer term the corn fundamentals may be quite a bit friendlier than what current prices suggest. While the USDA may raise projected corn yield in August I also believe that they could raise export demand as well. This could offset somewhat and leave corn with a 1.6-1.7 billion bushel carry over, significantly less than what we have been seeing in recent years. In the short term however I wouldn't be surprised to see corn pull back from key resistance levels. The nearby forecast is more favorable and selling from both technical traders and producers may pick up. A pull back in corn may be a good longer term buying opportunity though.
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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
December 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 firstname.lastname@example.org
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.