Weekly Corn Market Update 10/23/20
December 2020 (Dec20) corn futures (the benchmark for new-crop corn) finished the week higher by 17.25-cents (~4.29%), settling at $4.1925/bushel. This week's price action took place in a 19.25-cent (~4.79%) range. This week's high of $4.20/bushel was two-cents into the notable band we published last week, and the weekly settlement was 1.25-cents into that range. The week's high of 4.20/bushel was just shy of the contract high of $4.24/bushel from May 3rd, 2018.
The fundamental demand picture that we first visited on March 13th fell this week. April 2021 futures for Crude Oil stumbled ~2.85%. While Live Cattle and Lean Hog futures for April 2021 fell ~3.81% and ~5.33%, respectively. Fundamental traders continue to focus on incoming harvest data.
The technical picture remains interesting this week. Various momentum indicators remain in overbought levels on the daily chart. Though, some divergences in these indicators should continue to be a concern for bullish players. The weekly chart is clearer this week with the various momentum indicators we follow now in overbought territory. We see the next significant upside level between $4.23/bushel and $4.24/bushel, and we see the next downside level between $4.09/bushel and $4.12/bushel. The spread between Dec20 and Mar21 corn futures narrowed by 4.00-cents this week, settling at 1.00-cent. Given the overbought state of the market and relatively extreme calendar spread levels, we think market participants should exercise maximum caution. Markets like this can reverse quickly and aggressively. We've stressed caution about chasing or fading this rally for the last five weeks, and we still believe that is prudent.
Implied volatilities (the cost of options) finished mixed on the week. Near-term expirations were slightly lower. There was strength in the back of the curve, signaling that options traders expect increased volatility to continue for some time.
Looking ahead to next week, we see a ~52.9% chance that Dec20 corn futures will finish the week lower. We'd consider movement within the $4.0525-$4.3600 per bushel range to be unremarkable. Noteworthy moves would extend to the $3.8625-$4.6375 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), most of the average has set, and it will likely settle within a nickel of $4.00/bushel. With just over 77% of the total observations collected, the average rests at $3.9668/bushel. We're in the process of rolling over to next the next marketing year, so there will be no more crop insurance distribution charts for the 2020 crop year. We'll be back to publishing charts of our expected distributions in a few weeks for the 2021 crop year.
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.