Weekly Corn Market Update 03/10/23
December 2023 (Dec23) corn futures (the benchmark for 2023 corn production) finished the week lower by 13.25 cents (~2.32%), settling at $5.5775/bushel. This week's price action occurred in a 20.75-cent (~3.63%) range. The week's low was 9.75 cents below the unremarkable band we published last week.
Our corn demand index (CDI) outperformed Dec23 corn futures this week - falling only 1.74%. The ratio of Nov23 soybean futures divided by Dec23 corn futures rose again this week from 2.40 to 2.43 - notching a new high weekly settlement for the year. The war in Ukraine, executive branch policy, increasing tensions with China, Federal Reserve interest rate policy, and the Dollar remain concerns. Dec23 corn futures' recent underperformance compared to related futures contracts remains our primary fundamental focus this week.
Depending on one's perspective, Dec23 corn futures remain in either a long-term uptrend originating from the spring lows of 2020 or a medium-term downtrend beginning from the spring 2022 highs. However, this week's price action further weakened the argument that Dec23 corn futures remain in a long-term uptrend. In our opinion, Dec23 futures must hold the area around $5.46/bushel for all but the most-generous technicians to argue that the long-term uptrend remains intact. We see technical levels below the market at around $5.46, $5.14, $4.98, $4.83, $4.63, and $4.20/bushel. We see technical levels above the market at around $5.63, $5.84, $6.03, $6.14, $6.31, $6.55, and $6.78/bushel. Daily momentum indicators settled in oversold territory this week - while weekly momentum indicators settled in neutral to oversold territory. The weekly stochastics continue to display a notable divergence with recent price action. Daily Bollinger Band Bandwidth widened this week. Carry spreads from Dec23 to Mar24, May24, and Jul24 widened this week.
Our at-the-money model volatilities for the 2023 crop mostly finished higher this week, with the deferred expirations behind Dec23 finishing mixed. Option volatilities remain cheaper than a year ago, especially in near-term, short-dated new crop options. Our primary focus is moving our established options position around to capture market volatility to help offset time decay. 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 Dec23 corn futures, we consider trade in the $5.4475-$5.6875 per bushel range unremarkable. Notable moves extend to the $5.2125-$5.8775 per bushel range. Price action beyond that would be extreme. Be sure to visit our Twitter page to vote in the poll we typically hold there each week. While you are there, please give us a follow.
Given Dec23 futures' current 33.25-cent discount to the spring price, increased crop insurance coverage might be an excellent way to help "catch up" for those who feel behind on their marketing efforts - consult a qualified crop insurance agent before making any decisions. For the fall crop insurance price, we see a median of $5.4125/bushel with a mode between $5.20 and $5.25/bushel. This week the fall price distribution widened and shifted lower with increased implied volatility and lower futures prices. See the crop insurance charts below.
This week, we made one trade for our Quartzite Precision Marketing customers in the 2023 crop. On Thursday morning, near the weekly low, we collected a nice premium to roll some in-the-money, short-dated May put options down nearer to the money.
There is still time to join our 2023 client roster for our Quartzite Precision Marketing program. If you want to learn more about working with us for the 2023 growing season, reach out.
#AgTwitter & #oatt - cast your vote in this week's poll, then click over to read our Weekly #Corn #Market Update:https://t.co/pUTe0hXr11
— Quartzite Risk Management LLC (@QuartziteRMLLC) March 11, 2023
We think these scenarios have roughly equal probability next week. Where do you think #cbot Dec23 corn #futures will settle next week?
Thanks for taking the time to read. We look forward to your questions and feedback. Thanks again.
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Weekly Price Levels and Corn Demand Index
As a reminder, the Quartzite Risk Management Corn Demand Index references the weekly change in April 2024 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 Dec23 corn futures settlement on 11/04/22; 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.
