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.
Last week corn conditions improved slightly to 78% good to excellent. So far this is a very good looking corn crop indeed. However, with huge rain totals in the last few days over a large portion of the Corn Belt how will this affect the crop? Is too much of a good thing a bad thing?
Social media has been flooded in recent days with pictures of flooded fields with corn crops under water. Corn can stand to be in water however it can have a negative impact. On Thursday as rains pounded Northern Illinois traders started to wonder if too much rain was becoming a bad thing for the corn crop.
Sign up for our Morning Ag Hedge newsletter! Sign up here:http://www.zaner.com/landing/ag_hedge_newsletter.asp
Conditions at near record levels for this time of year due to good rain coverage and warm temps pushing the crop along. The biggest improvements were in Iowa and the Dakotas, where massive amounts of rain has fallen this week. Texas and Missouri were the largest declines as crops continue to struggle with heat. At the moment I think crop conditions are set to slide a point or two next week.
The very good crop rating and a non-threatening weather forecast has been part of the driver for corn's nearly 70 cent decline in the last few weeks. However this has not been the only driver and possibly not the greatest. Trade war fears have hit the agricultural sector hard and the uncertainty has caused speculators to run for the doors.
Seemingly, from the trade talk combined with the sharp decline in price, the corn market has factored in a national average yield over the USDA's 174 bu/acre trend line projection. It's hard to say exactly what is factored into the market, but some would suggest it is somewhere between 178 and 180. Interestingly this would likely still mean a declining stocks figure for both the US and the world depending on demand and acreage.
As far as demand is concerned I would say that the USDA's export estimate could be a little low as the Ukrainian crop might not be as big as expectations. A hot and dry start to their growing season has brought yield into question, but also acreage may not be as robust as USDA expectations. Currently the USDA is looking for a 30 Mmt crop in the Ukraine while some local analysts are looking for a crop closer to 26 Mmt. Keep in mind that a bigger Ukrainian crop was the main explanation the USDA had for pegging exports 200 m/bu lower than this year.
It is very difficult to say where corn could go in the short term. Trade war fears still dominate the market. If the fight between the US and Mexico over NAFTA escalates this could have a very significant and long lasting impact on corn. If however, the fight over NAFTA does not escalate it seems that maybe we have taken too much premium out of the corn market. This would be especially true if too much rain, or hot/dry conditions were to develop later in the growing season.
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)
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 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.