Market Commentary for 12/6/24
Corn
For the last 3 months, corn has traded in a very tight range.In 55 of 68 trading sessions, March corn futures closed between $4.20 and $4.40.
In 28 of 33 trading sessions, March corn has closed between an even tighter $4.25 to $4.40 range.
And, it’s been over 5 months since March corn closed above $4.50.
Can Corn Keep Going Up?
While export demand has been great, and could help support a rally, there is still way too much corn that hasn’t been sold still sitting in farmers’ bins.That’s why it’s hard for me to be bullish right now.I expect any rally will be met with farmers selling to bring in some cash before and right after the new year.
Beans
January bean futures have traded in a tight 25 cent range from $9.75 to $10 over the last 2 months.Only 11 of the last 37 trading session have had closes above $10.
On a positive note, beans have managed to continue trading above $9.75 despite the expanded acres in South America, the threat of a trade war with China, and the high carryout potential in the US.
Market Action
Last week I rolled my December sales contracts forward to the March contract and collected a 10-cent premium in doing so.
I had expected the December / March corn spread to trade similarly to how the September / December spread had traded back in August.As the chart below shows, the September / December spread went as high as 25 cents in the final days of August.
Unfortunately for me, the December / March corn spread didn’t go as wide in its final month.I finally had to pull the trigger and roll my sales before the December contract went into the delivery period at the end of November as shown in the chart below:
The December / March spread probably didn’t perform like the September / December spread this year because harvest was extremely fast.Since a lot of 2023 corn was sold at the end of August, to make room for the new crop, the spread widened. Then when harvest was over quickly, most farmers locked their bins a month sooner than normal.And with futures values lower than average break evens throughout the US, farmers weren’t selling in late November like they usually do.
In hindsight, I should have rolled my December futures to the March contract in August or early September, and I could have made about 8 cents more, but that would have been hard to know at the time.
Does That Spread Premium Cover the Cost to Hold Grain in the Bin?
I collected 10 cents per bushel to hold my grain in the bin for another 3 months, or a 3.33 cent profit per month.The cash value of corn in my area is around $4.25.Assuming an operating note of 8% interest, it costs me 2.83 cents per bushel per month to hold the grain in the bin.That means I’m still making a very small profit of ½ cent per bushel per month to wait for a better basis value sometime in 2025.
Bottomline
Right now, I have sold 100% of my 2024 corn production at what is essentially $4.76 against March futures. I can still roll these sales forward again to the May or July contract and collect more premium while I wait for better basis values.While I would have liked to make a few more cents in the roll trade above, I’m comfortable with my current situation.
Want to read more by Jon Scheve?
Is China Getting Ready For A Trade War?
Will Corn Break Out Of The Tight Range Its Been Trading In Over The Last 5 Months?Beans Are Stuck In A Sideways Market, Can They Rally?Strategies To Use In Range Bound MarketsIs Another Push Lower In Prices Still Coming For Beans?
