Weekly Corn Market Update 07/07/23
December 2023 (Dec23) corn futures (the benchmark for 2023 corn production) finished the week lower by 0.25 cents (~0.05%), settling at $4.9450/bushel. This week's trading occurred entirely within the unremarkable band we published last week.
Our corn demand index (CDI) outperformed Dec23 corn futures again this week - rising 0.90%. The ratio of Nov23 soybean futures divided by Dec23 corn futures slipped from 2.72 to 2.66. Potential instability in the US financial system, the war in Ukraine, executive branch policy, tensions with China, Federal Reserve interest rate policy, and the Dollar remain concerns. The USDA releases its July World Agricultural Supply and Demand Estimates next Wednesday.
Dec23 corn futures remain well below the long-term downtrend trendline extending from the highs of 04/27/22 and 10/14/22. We see technical levels below the market at around $4.83, $4.63, and $4.20/bushel. We see technical levels above the market at around $4.98, $5.14, $5.25, $5.48, $5.63, $5.71, $5.84, $6.03, $6.14, $6.31, $6.55, and $6.78/bushel. Most daily and weekly momentum indicators finished the week in neutral territory. However, some daily indicators remain in oversold territory. Carry spreads from Dec23 to Mar24, May24, and Jul24 finished mixed this week.
Our at-the-money model volatilities for the 2023 crop finished the week lower. Our new crop model volatilities are considerably lower than comparable volatilities a year ago. Our primary focus remains trading around our clients' established positions to capture market volatility to help offset time decay. See the model volatility 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 $4.7175-$5.1875 per bushel range unremarkable. Notable moves extend to the $4.3450-$5.5725 per bushel range. Price action beyond that would be extreme. A chart of these levels over time is available below. 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 $4.8775/bushel with a mode between $4.70 and $4.75/bushel. The expected distribution of fall crop insurance prices narrowed considerably on decreased implied volatility and the passage of time. See the crop insurance charts below.
This week we made three trades for our Quartzite Precision Marketing customers in the 2023 corn crop. On Monday, we purchased a downside put calendar spread from short-dated Sep23 to Oct23. On Friday, we closed that trade on legs (two trades) for a small winner.
#AgTwitter & #oatt - cast your vote in this week's poll, then click over to read our Weekly #Corn #Market Update: https://t.co/0DxG0l2ic7
— Quartzite James (@QuartziteRMLLC) July 7, 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.
