Weekly Corn Market Update 11/18/22
December 2022 (Dec22) corn futures (the benchmark for 2022 corn production) finished the week higher by 9.75-cents (~1.48%), settling at $6.6775/bushel. This week's price action occurred in a 23.75-cent (~3.61%) range. All of this week's trading took place within the unremarkable band we published last week.
Our corn demand index (CDI) underperformed Dec22 corn futures this week - falling ~3.00%. Dec22 corn futures returned to a significant premium over the CDI. The war in Ukraine, executive branch policy, tensions with China, Federal Reserve interest rate policy, and the strong Dollar remain concerns. Recent price action in the Dollar continues to alleviate some of that latter concern.
This week, Dec22 corn futures were supported by and remain above the long-term trendline connecting the lows of 03/31/21 and 09/10/21. However, this week they again settled below a shorter-term trendline connecting the 07/22/22 and 08/18/22 lows and another shorter-term trendline connecting the 09/01/22 and 09/28/22 lows. We see support below the market at around $6.58, $6.47, $6.30, $5.99, and $5.80/bushel, with significant long-term support between $5.26 and $5.35 per bushel. We see resistance above the market around $6.88, $6.99, $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. Daily Bollinger Band Bandwidth widened slightly this week. Carry spreads from Dec22 to Mar23, May23, and Jul23 softened considerably this week, with Jul23 now trading at a significant inversion.
Our at-the-money model volatilities for the 2022 crop finished lower this week. Option volatilities remain near their lowest levels of the year. It may be an excellent time to purchase options if needed. We believe managing options correctly at these levels 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 $6.5050-$6.8400 per bushel range unremarkable. Notable moves extend to the $6.1250-$7.1175 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.
This week, we were mostly quiet in the corn market for our Quartzite Precision Marketing customers. On Monday, we made a small scalp in some weekly puts, and on Tuesday, we opened a small position in some short-dated May23 puts to increase our protection for the 2023 crop year. Additionally, we made a customer-specific trade or two to manage individual post-harvest risk.
We 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 is the right time to consider your 2023 marketing plan. We're accepting new customers for the 2023 crop year, but space is limited, so contact us soon if you're interested. 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.
#AgTwitter & #oatt - cast your vote in this week's poll, then click over to read our Weekly #Corn #Market Update:https://t.co/okLbRXudtW
— Quartzite Risk Management LLC (@QuartziteRMLLC) November 20, 2022
We think these scenarios have roughly equal probability next week. Where do you think #cbot Dec22 corn #futures will settle next week?
We will not publish our Weekly Corn Market Update for the next several weeks as we prepare for the 2023 marketing year.
Look for the Weekly Corn Market update to return mid-to-late December, focusing on the 2023 crop year. We hope you have a happy Thanksgiving and can enjoy some downtime with those who matter most. Thanks for reading along all season - we hope it was a good one and that next year is even better. If you’re interested in working with us for the 2023 crop year, now is the time to reach out.
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 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.
