Weekly Corn Market Update 10/09/20

December 2020 (Dec20) corn futures (the benchmark for new-crop corn) finished the week higher by 15.25-cents (~4.02%), settling at $3.9500/bushel. This week's price action took place in a 20.50-cent (~5.40%) range. The week's high of $3.9825/bushel was 3.75-cents into the notable band we published last week, and the weekly settlement was 0.50-cents into that band. We've not seen a higher weekly high or settlement since January.

The fundamental demand picture that we first visited on March 13th settled mixed this week - though healthier overall in our estimation. April 2021 futures for Crude Oil jumped ~8.32%. Live Cattle futures for April 2021 fell ~1.11%, while Lean Hog futures for April 2021 gained by ~3.29%. The USDA's Friday release of its monthly WASDE report significantly impacted the market, fueling a rally to levels not seen since January. Fundamental traders continue to focus on incoming harvest data.

The technical picture remains interesting this week as we approach the structural round number of $4.00/bushel. Various momentum indicators remain in overbought levels on the daily chart. Though, the divergences in these indicators should continue to be a concern for bullish players. The picture remains murky on the weekly chart, with various momentum indicators continuing to disagree. We see the next significant upside level between $4.00/bushel and $4.05/bushel, with downside levels in the high $3.80s, low $3.60s, and low $3.50s. The contract-high for the Dec20 corn futures contract is $4.24/bushel, set in May of 2018. The spread between Dec20 and Mar21 corn futures narrowed by 2.25-cents this week, settling at 7.25-cents - its narrowest weekly settlement of the year.

We've stressed caution about chasing or fading this rally for the last three weeks, and we still believe that is prudent.

 Implied volatilities (the cost of options) finished higher on the week. At these levels, and this point in the season, we're continuing to pare our clients' option positions down to the minimum necessary to account for remaining yield uncertainty and cash demands.

Looking ahead to next week, we see a ~53.3% chance that Dec20 corn futures will finish the week lower. We'd consider movement within the $3.8100-$4.1200 per bushel range to be unremarkable. Noteworthy moves would extend to the $3.6475-$4.3550 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 at the Fall 2020 Crop Insurance Price (the average settlement of Dec20 corn futures in October), we believe there is a ~68.4% chance the average will be below this week's settlement price of $3.9500/bushel. With just under 32% of the total observations collected, the average rests at $3.8539/bushel. See the attached chart for a visual representation comparing our expectations for the Fall 2020 Crop Insurance Price for this week and last.

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.