Weekly Corn Market Update 08/21/20

December 2020 (Dec20) corn futures (the benchmark for new-crop corn) finished the week higher by 2.50-cents (~0.74%), settling at $3.4050/bushel. This week's price action took place in a 10.50-cent (~3.11%) range. All of this week's trading took place within the unremarkable bands we published last week.

The fundamental demand picture that we first visited on March 13th settled lower this week. April 2021 futures for Crude Oil softened by ~0.14%. Live Cattle futures for April 2021 fell ~1.15%, and Lean Hog futures for April 2021 eased by ~0.15%. The market was mostly quiet this week, while it attempted to digest ongoing crop tours and the impact of the August 10th derecho in the corn belt. Uncertainty about final yields and harvested acres is high. The one thing we're confident of is that it will take some time for estimates to converge on the truth. Until then, we continue to recommend looking to the market for answers and staying market-neutral.

The technical picture seems slightly more clear this week. This week's action created some overbought conditions on a daily chart earlier in the week. We'd argue that the downtrend remains mostly intact, but we don't have much confidence in that assessment. On the broader weekly chart, some bullish divergences with momentum indicators are in play. On the other hand, a well-defined "doji" candle formed on the weekly chart this week, which could indicate a reversal of last week's rally. Another bearish signal is the widening spread between Dec20 and Mar21 corn futures. This week, that spread widened by 1.25-cents, settling at 12.50-cents.

In the corn options market this week, implied volatilities (the cost of options) for new crop corn fell sharply. We continue to see short-term new crop volatility in the soybeans as cheaper than similar durations in the corn market. Though, given the selloff in corn implied volatility, we are less actively seeking to move our volatility exposure into the bean side of the portfolio.

Looking ahead to next week, we see a ~51.2% chance that Dec20 corn futures will finish the week lower. We'd consider movement within the $3.3150-$3.5025 per bushel range to be unremarkable. Noteworthy moves would extend to the $3.1525-$3.7075 per bushel range. Price action beyond that would be considered extreme. Included below is a chart showing the history of these price levels. Before using these levels in any way, we strongly urge you to review our guide to Understanding Our Weekly Corn Market Update. 

Looking further ahead to the Fall 2020 Crop Insurance Price (the average settlement of Dec20 corn futures in October), we believe there is a ~53.5% chance the average will be below this week's settlement price of $3.4050/bushel. Notably, we now see a nearly ninety-percent chance that the Fall 2020 Crop Insurance Price will fall between $3.00 and $3.75/bushel. See the attached chart for a visual representation comparing our expectations for the Fall 2020 Crop Insurance Price for this week and last. Additionally, this week we've added a chart that breaks down our expectations by nickels rather than quarters - let us know what you think.

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, email, or phone at (970)294-1379. Thanks again, and have a great week.