Weekly Corn Market Update 09/25/20
December 2020 (Dec20) corn futures (the benchmark for new-crop corn) finished the week lower by 13.25-cents (~3.50%), settling at $3.6525/bushel. This week's price action took place in a 15.50-cent (~4.10%) range. This week's low of 3.6300/bushel was 2.25-cents into the notable band we published last week, and the weekly settlement right on the boundary of the unremarkable and notable ranges.
The fundamental demand picture that we first visited on March 13th settled mixed this week. April 2021 futures for Crude Oil fell ~2.50%. Live Cattle futures for April 2021 fell by ~1.38%, while Lean Hog futures for April 2021 rose ~1.78%. At this point, fundamental traders have their eyes firmly fixed on incoming harvest data, as well as next Wednesday's release by the USDA of its Quarterly Grain Stocks and Annual Small Grains Summary reports.
The technical picture continues to be interesting this week. This week's retreat alleviated overbought conditions on most daily momentum indicators, though some weekly momentum indicators remain in overbought territory. This week's selloff brought us right back to the breakout levels we noted two weeks ago. The spread between Dec20 and Mar21 corn futures narrowed by 1.00-cent this week, settling at 8.00-cents, the narrowest weekly settlement of the year.
Implied volatilities (the cost of options) finished lower on the week. November and December options were the weakest, and we are beginning to see renewed value in them at these levels. We would look to increase our clients' option positions on significant weakness in November or December options before next Wednesday's USDA release.
Looking ahead to next week, we see a ~52.0% chance that Dec20 corn futures will finish the week lower. We'd consider movement within the $3.5325-$3.7900 per bushel range to be unremarkable. Noteworthy moves would extend to the $3.3650-$4.0100 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 ~52.2% chance the average will be below this week's settlement price of $3.6525/bushel. See the attached chart for a visual representation comparing our expectations for the Fall 2020 Crop Insurance Price for this week and last.
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