Weekly Corn Market Update 04/17/20
December 2020 (Dec20) corn futures (the benchmark for new-crop corn) finished the week lower by 7.25 cents/bushel (~2.07%), settling at $3.4350/bushel. Dec20 corn futures traded in an 11.00-cent range (~3.14%) this week, slightly smaller than the average of the prior four weeks. The week's low of $3.4075/bushel was one tick below the unremarkable bands we published last week and marked a new contract low; otherwise, price action was generally unremarkable.
The fundamental case we first visited on March 13th settled mixed this week, though overall, we see it as slightly more negative than last week. April 2021 futures for Crude Oil fell ~1.32% this week. Relevant livestock markets ended mixed on the week, with Live Cattle futures for April 2021 higher by ~0.63%, and Lean Hog futures for April 2021 lower by ~2.87%. While down overall, the relative stability compared to recent weeks in these markets is encouraging.
On the technical side, Dec20 corn futures remain in a downtrend, posting another new contract low as they've done for seven of the past nine weeks. Various momentum indicators are now in disagreement as to both oversold conditions, and divergences from price action. Notably, the spread between Dec20 and Mar21 corn futures widened this week by 1.00-cent/bushel to 11.75-cents/bushel, trading as high as 13.00-cents/bushel. We see expansion in this spread as a general confirmation of the bearish tone in the marketplace. As usual, regardless of your fundamental or technical view, we recommend careful and deliberate risk management - not speculation.
In the corn options market this week, implied volatilities (the cost of options) were mixed. Though expirations in the meat of the growing and marketing cycle were higher on the week. While they're no longer the bargain they were earlier in the year, we continue to believe options are a vital part of any hedging strategy.
Looking ahead to next week, we see a ~53.6% chance that Dec20 corn futures will finish the week higher. We'd consider movement within the $3.3375-$3.5200 per bushel range to be unremarkable. Noteworthy moves would extend to the $3.2075-$3.6225 per bushel range. Price action beyond that would be considered extreme.
Looking further ahead to the Fall 2020 Crop Insurance Price (the average settlement of Dec20 corn futures in October), we believe there is a ~56% chance the average will come in below this week's settlement of $3.4350/bushel for Dec20 corn futures. We now see a considerably higher chance (about 23.4%) that the October average will come in below $3.00/bushel rather than above $4.00/bushel (about 14.4%). This week's price action shifted our overall expectations lower. See the attached chart for a visual representation of our expectations for the Fall 2020 Crop Insurance Price.
Thanks for taking the time to read, and we look forward to your questions and feedback. Please feel free to contact us via our contact form, Facebook, Twitter, by phone at (970)294-1379, or by email. As fieldwork begins to pick up and the planters begin to roll in earnest, we hope you have a safe and successful spring season. Best of luck next week, and we hope you enjoyed this week's report.
