Weekly Corn Market Update 09/09/22
December 2022 (Dec22) corn futures (the benchmark for 2022 corn production) finished the week higher by 19.25-cents (~2.89%), settling at $6.8500/bushel. This week's price action occurred in a 29.00-cent (~4.36%) range - the narrowest since April for the second straight week. This week's high was 0.75-cents above the unremarkable band we published last week. The weekly settlement was 2.75-cents below our unremarkable upper level.
Our corn demand index (CDI) underperformed Dec22 corn futures again this week, rising only 0.42%. Dec22 corn futures widened their premium over the CDI again, indicating increasing supply concerns. The war in Ukraine, executive branch policy, tensions with China, Federal Reserve interest rate policy, and the strengthening Dollar also remain concerns. The USDA reports its monthly World Agricultural Supply and Demand Estimates (WASDE) on Monday.
Dec22 corn futures remain above the long-term trendline connecting the lows of 03/31/21 and 09/10/21. We see support below the market at around $6.58, $6.47, $6.30, $5.99, and $5.80/bushel. Significant long-term support is between $5.26 and $5.35 per bushel. We see resistance above the market around $6.88, $7.04, $7.14, $7.27, $7.37, $7.57, and $7.66/bushel. Daily and weekly momentum indicators settled in neutral territory this week - though some daily momentum indicators remain near overbought levels. Daily Bollinger Band Bandwidth narrowed this week. Carry spreads from Dec22 to Mar23, May23, and Jul23 contracted this week. Notably, Dec22 to Jul23 settled at a small inversion, which has not happened since the week ending 6/17/22.
Our at-the-money model volatilities for the 2022 crop finished higher this week. Option volatilities remain near some of their lowest levels of the year. It may still be an excellent time to purchase options if needed. Even with these volatilities, we still think properly managing options requires opportunistic spreading and careful position management to manage production uncertainty and volatility risk. 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 Dec22 corn futures, we consider trade in the $6.5175-$7.2175 per bushel range unremarkable. Notable moves extend to the $6.1250-$7.6925 per bushel range. Price action beyond that would be extreme. Be sure to visit our Twitter page to vote in the poll we hold there each week. While you are there, please give us a follow.
Our median Fall Price estimate is $6.8050 per bushel this week, with a mode between $6.65 and $6.70. Our Fall Price distribution shifted higher with the rally. See the charts below.
This week, we made a few trades in the new crop corn market for our Quartzite Precision Marketing customers. We used Wednesday's early rally to roll some out-of-the-money October puts up to slightly-in-the-money October puts on a ratio. Later in the morning, when the market broke, we collected a small premium to roll those in-the-money October puts, down-and-out to November near-the-money puts. Friday morning, we purchased some dollar-cheap expiring Week-2-September puts. That trade would have given us some bullets to work around the Week-3-September puts we remain short from the calendar we traded last week had the market reversed. Instead, the market rallied, and we took the opportunity to roll some out-of-the-money December puts up to slightly-in-the-money puts on a ratio. Shortly after, we made a few outright purchases of December out-of-the-money puts in several accounts to adjust individual positions. We still think producers should protect their investment with a disciplined and flexible risk management strategy like the one at the heart of Quartzite Precision Marketing. Now might be the right time to consider your 2023 marketing plan. If you have any questions or want to learn more about what we do, we are always happy to chat about the markets, and there is no obligation.
Quartzite Risk Management LLC
— Quartzite Risk Management LLC (@QuartziteRMLLC) September 10, 2022
Same question as above, but for Nov22 #Soybean #futures #oatt #agtwitter
Will they settle next week:
Thanks for taking the time to read. We look forward to your questions and feedback. Thanks again. Don't forget to take a moment Sunday morning to remember the events of September 11th, 2001. Depending on the weather, our founder may carry a flag up a local peak in remembrance of that day. This photo is of our founder and a friend on top of Longs Peak in Colorado last September 11th.
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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 2023 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 Dec22 corn futures settlement on 11/12/21; 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.
