Understanding Our Weekly Corn Market Update - 2021 Edition

We publish our Weekly Corn Market Update each week to give people a general insight into how we do things. We thought it would be useful to create a guide to interpreting that report - this is that guide. For starters, please notice that we used "understanding" in the title and not "using." Trading, particularly speculating, in commodity interests carries significant risk. We believe most producers should hire a qualified professional risk manager, not guess where the market is going.

Our weekly update focuses on new crop corn because of Quartzite's focus on managing the complex risk associated with uncertain production. Once the harvest is in the bin, the hedging problem is much less complicated.

Our weekly update has two primary sections, a review of last week and a look ahead.

Four sub-sections usually comprise our review of last week. We generally open with a summary of new-crop corn futures trading during the week and anything we find notable about that. We then move on to two sections with brief notes about the market's fundamental and technical state. We rarely use either of these analyses when managing risk for our clients. Using either implies some predictability to the market. We think we serve our clients best when we treat prices as random numbers and avoid guessing where they are going. The last section in our review of the prior week notes what happened in the new crop corn options market. We believe options are a nearly-essential part of every producer's hedging strategy. This section is where we will let you know if we think options a relatively cheap or expensive. This year, we will also be including a chart comparing the at-the-money volatilities we are using this week with those from the prior week.

Two sub-sections form our usual look ahead. First, we look forward to next week. We release three price ranges for the following week - unremarkable, notable, and extreme. We would expect next week's settlement price to be in the unremarkable range about two-thirds (~68.27%) of the time, in the notable band roughly one-quarter (~27.18%) of the time, and in the extreme territory about one-twentieth (~4.45%) of the time. We use these ranges as a rough guide to making decisions about adjusting hedges for our clients. We discourage anyone from using these levels without knowing exactly how and why we use them.

We also include a look ahead to Crop Insurance Prices. In that discussion, we mention any changes from the prior week that we find interesting. Additionally, we publish charts displaying our expectations for the distribution and cumulative probability of crop insurance prices comparing this week with the prior week. We derive this information from listed option prices for the relevant crop year. The probabilities in these charts reflect our interpretation of the probabilities implied by listed options prices.

We want to add that we do not use much of the information we publish in our Weekly Corn Market Update to make risk management decisions for our clients. However, we do derive much of the information we post each week from the data we use to make risk management decisions on behalf of our clients. There are no answers here. If you would like to learn more about how we help our clients navigate difficult markets, please contact us via our contact form, Facebook, Twitter, email, or phone (970)294-1379, or take a look at our Quartzite Precision Marketing program for grain and soybean producers.