Weekly Corn Market Update 05/05/23
December 2023 (Dec23) corn futures (the benchmark for 2023 corn production) finished the week higher by 7.00 cents (~1.33%), settling at $5.3475/bushel. This week's price action occurred in a 24.50-cent (~4.64%) range. On Wednesday morning, Dec23 corn futures traded 1.25 cents below the notable down level we published last week.
Our corn demand index (CDI) underperformed Dec23 corn futures this week - falling 4.42%. The ratio of Nov23 soybean futures divided by Dec23 corn futures stayed steady at 2.39. Potential instability in the US financial system, the war in Ukraine, executive branch policy, increasing tensions with China, Federal Reserve interest rate policy, and the Dollar remain concerns.
Dec23 corn futures remain in a long-term downtrend originating from the spring 2022 highs. We see technical levels below the market at around $5.14, $4.98, $4.83, $4.63, and $4.20/bushel. We see technical levels above the market at around $5.46, $5.63, $5.71, $5.84, $6.03, $6.14, $6.31, $6.55, and $6.78/bushel. Most daily momentum indicators rebounded to neutral territory this week, while weekly momentum indicators remain in oversold territory. Daily Bollinger Band Bandwidth widened again this week. Carry spreads from Dec23 to Mar24, May24, and Jul24 narrowed this week.
Our at-the-money model volatilities for the 2023 crop finished the week lower. Option volatilities remain cheaper than a year ago. Our primary focus remains 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 $5.2275-$5.4800 per bushel range unremarkable. Notable moves extend to the $5.0625-$5.6700 per bushel range. Price action beyond that would be extreme. Be sure to visit our Twitter page to vote in our weekly poll. While you are there, please give us a follow.
For the fall crop insurance price, we see a median of $5.2025/bushel with a mode between $4.95 and $5.00/bushel. See the crop insurance charts below.
This week, we were generally inactive for our Quartzite Precision Marketing customers in the 2023 corn crop. On Wednesday morning, we made an outright futures buy near our notable down level for several customers holding more aggressive cash-sale and crop insurance positions. We sold these back out later in the morning as futures recovered to near unchanged on the week, booking a nice scalp to offset some of their option decay.
#AgTwitter & #oatt - cast your vote in this week's poll, then click over to read our Weekly #Corn #Market Update: https://t.co/WwAzd4doja
— Quartzite Risk Management LLC (@QuartziteRMLLC) May 5, 2023
We think these scenarios have roughly equal probability next week. Where do you think #cbot Dec23 corn #futures will settle next week?
If you think Quartzite Precision Marketing might be a good fit for your operation, reach out to learn more and discuss your options.
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.
