Weekly Corn Market Update 11/03/23
December 2023 (Dec23) corn futures (the benchmark for 2023 corn production) finished the week lower by 3.50 cents (~0.73%), settling at $4.7725/bushel. Dec23 corn futures traded in a 16.25-cent range this week. This week's low was 0.75 cents below the unremarkable range we published last week.
Our corn demand index (CDI) underperformed Dec23 corn futures this week - falling 1.03%. The ratio of Nov23 soybean futures divided by Dec23 corn futures expanded from 2.70 to 2.78. Potential instability in the US financial system, 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.
Dec23 corn futures remain 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 $4.63 and $4.20/bushel. We see technical levels above the market at approximately $4.83, $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. Daily and weekly momentum indicators finished the week in neutral to oversold territory. Carry spreads from Dec23 to Mar24, May24, and Jul24 ended wider on the week. Notably, the spread from Dec23 to Dec24 widened by 9.25 cents this week.
Our at-the-money model volatilities for the 2023 crop finished mixed this week, with Week 2 Nov gaining while the rest lost. Our primary focus is preparing for the 2024 crop year. 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 $4.6400-$4.9200 per bushel range unremarkable. Notable moves extend to the $4.4050-$5.2350 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, feel free to follow us.
The discovery period for the fall crop insurance price ended this week. With 100% of the observations recorded, the average rounds to $4.88/bushel.
We made several trades in corn for our Quartzite Precision Marketing customers this week. On Monday, we sold a downside put calendar from Dec24 to short-dated Apr24, collecting a nice premium in the process and shortening the overall duration of our 2024 hedges. Additionally, we made our final purchase of deep-in-the-money Mar24 puts to replace crop insurance coverage for several customers. On Wednesday's weakness, we rolled the entire Mar24 deep-in-the-money put position down to a less deep-in-the-money strike, collecting a significant premium. On Thursday, we made several trades in the 2024 crop to onboard a new client. Additionally, near the close on Thursday, we rolled some in-the-money Dec23 puts down nearer to the money for several clients for whom we are still maintaining some true optionality against their 2023 production.
#AgTwitter & #oatt - cast your vote in this week's poll, then click over to read our Weekly #Corn #Market Update: https://t.co/x1mvu3pXYw
— Quartzite James (@QuartziteRMLLC) November 3, 2023
We think these scenarios have roughly equal probability next week. Where do you think #cbot Dec23 corn #futures will settle next week?
We'll be taking a few weeks off from publishing the Weekly Corn Market Update while we update our model for the 2024 growing season - we'll be back in December. Until then, enjoy the rest of November and have a happy Thanksgiving. Thanks for following along all season.
If you think Quartzite Precision Marketing might be a good fit for your operation, now is the time to consider your 2024 marketing plan; 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.
