Weekly Corn Market Update 10/16/20
December 2020 (Dec20) corn futures (the benchmark for new-crop corn) finished the week higher by 7.00-cents (~1.77%), settling at $4.0200/bushel. This week's price action took place in a 21.75-cent (~5.51%) range. All of this week's trading took place within the unremarkable band we published last week. The week's high of 4.09/bushel was the highest Dec20 corn futures have traded since late October of 2019.
The fundamental demand picture that we first visited on March 13th settled mixed this week - but weaker overall in our estimation. April 2021 futures for Crude Oil rose a minuscule ~0.02%. While Live Cattle and Lean Hog futures for April 2021 fell ~1.94% and ~1.24%, respectively. Fundamental traders continue to focus on incoming harvest data.
The technical picture remains interesting this week as futures broke 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 $4.09/bushel and $4.12/bushel, with downside levels in the high $3.80s, low $3.60s, and low $3.50s. This week's settlement was in the middle of the $4.00-$4.05/bushel price level we mentioned last week. 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 5.00-cents.
We've stressed caution about chasing or fading this rally for the last four weeks, and we still believe that is prudent.
Implied volatilities (the cost of options) finished lower on the week. Despite the decline, we do not see value at these levels. At 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 ~54.1% chance that Dec20 corn futures will finish the week lower. We'd consider movement within the $3.8925-$4.1800 per bushel range to be unremarkable. Noteworthy moves would extend to the $3.7450-$4.4050 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 ~74.6% chance the average will be below this week's settlement price of $4.0200/bushel. With just under 55% of the total observations collected, the average rests at $3.9002/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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