Weekly Corn Market Update 01/12/23
December 2024 (Dec24) corn futures (the benchmark for 2024 corn production) finished the week lower by 12.25 cents (~2.48%), settling at $4.8175/bushel. This week's price action occurred in a 19.75-cent (~2.01%) range. On the heels of the USDA's data drop, the weekly low Friday landed right on the border between our notable and extreme down ranges. From there, the market recovered slightly and settled in the middle of our notable down range.
Our corn demand index (CDI) outperformed Dec24 corn futures this week, falling only 0.40%. Dec24 corn futures settled at a slight discount to the CDI this week. The war in Ukraine, executive branch policy, tensions with China, Federal Reserve interest rate policy, the Dollar, and instability in the Middle East remain concerns. The USDA released its Annual Crop Production, Quarterly Grain Stocks, and Monthly WASDE on Friday.
Dec24 corn futures have been in a long-term downtrend channel capped by a trendline connecting the highs of April 20th, 2022, and June 21st, 2023, and supported by a trendline connecting the lows of July 22nd, 2022, and May 18th, 2023. We see technical levels below the market at around $4.73, $4.57, $4.41, and $4.14/bushel. We see technical levels above the market at about $4.86, $5.01, $5.14, $5.25, $5.44, $5.76, $5.90, and $6.02/bushel. Most daily and weekly momentum indicators are in, or near, oversold territory. Carry spreads from Dec24 to Mar25, May25, and Jul25 widened this week.
Our at-the-money model volatilities for the 2024 crop finished mixed this week and lower than comparable levels a year ago. We are opportunistically looking to add options to our client portfolios. See the charts below for more details. One compares our closing at-the-money model volatilities for this week and last. The other compares our current model volatilities with the forward volatilities they imply between consecutive expirations.
For next week's trading in Dec24 corn futures, we consider trade in the $4.7325-$4.9050 per bushel range unremarkable. Notable moves extend to the $4.6225-$5.0200 per bushel range. Price action beyond that would be extreme.
Our model shows an implied median of $4.8100/bushel for the spring crop insurance price with a mode between $4.80 and $4.85/bushel. For the fall crop insurance price, we see a median of $4.6275/bushel with a mode between $4.35 and $4.40/bushel. See the crop insurance charts below.
We are finalizing our 2024 client roster for the Quartzite Precision Marketing program. We have a few spots left, so if you're interested in working with us for the 2024 growing season, reach out soon to explore your options.
Thanks for taking the time to read. We look forward to your questions and feedback. Thanks again.
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#AgTwitter & #oatt - cast your vote in this week's poll, then click over to read our Weekly #Corn #Market Update: https://t.co/JmVgAzWguK
— Quartzite James (@QuartziteRMLLC) January 13, 2024
We think these scenarios have roughly equal probability next week. Where do you think #cbot Dec24 corn #futures will settle next week?
Weekly Price Levels and Corn Demand Index
As a reminder, the Quartzite Risk Management Corn Demand Index references the weekly change in April 2025 futures for Crude Oil, Live Cattle and Lean Hogs. We weigh the percentage change in those contracts and compute the index's percentage change. Crude Oil accounts for 50% of the index, and Live Cattle and Lean Hogs each make up 25%. To create the chart, we started the index at the Dec24 corn futures settlement on 11/10/22; then added or subtracted the index's weekly percentage change. We want to add a few warnings. First, there are only a handful of data points - not much to go on. Second, the index references relatively illiquid markets - making any strategy based on it challenging to execute. Third, we expect divergences to increase as we get into the growing season when the corn market will likely look more toward supply for its direction. In short, we would not attempt to trade on this information without much more data, nor would we recommend anyone else does.
