December 2021 (Dec21) corn futures (the benchmark for 2021 corn production) finished the week higher by 6.00-cents (~1.43%), settling at $4.2450/bushel. This week's price action took place in a 10.25-cent (~2.45%) range. All of this week's trading took place in the unremarkable band we published last week. Notably, the weekly settlement was the high of the week, a new 52-week, and within a half-cent of contract-highs set back in April of 2018.

Our corn demand index was down 0.39% this week. This week's underperformance is unsurprising, given last week's outperformance. Fundamental discussions should still note increasing concerns over COVID-19, uncertainty surrounding future executive branch policy, and the Georgia Senate races. These three factors continue to provide potential sources of volatility. They are of particular concern where they might impact U.S. and Chinese trade relations.

Technically speaking, Dec21 corn futures remain in an uptrend that started from the August lows. Both daily and weekly momentum indicators are in considerably overbought territory. Additionally, Dec21 corn futures are near or above the top of the channel that has contained the rally since August. Given those two factors and the looming contract high at $4.25/bushel, we would not be surprised by a pullback to the $4.10-$4.12/bushel area.

As always, regardless of your fundamental or technical view, we recommend careful and deliberate risk management - not speculation.

The short-dated options market for the 2021 crop year remains relatively illiquid. However, there is adequate liquidity in the Dec21 options expiration. We still hold a few short-dated March puts to protect our Quartzite Precision Marketing clients until the spring price begins setting in February. Implied volatility for options on the 2021 corn crop strengthened again this week. We still see the most value in the May and August short-dated new crop options. Implied volatilities are, in our opinion, at somewhat-expensive levels. As such, we would look to use the minimum number necessary to manage production uncertainty. Additionally, liquidity concerns could prevent establishing positions at favorable levels. See the chart below for a comparison of our closing at-the-money model volatilities for this week and last.

Looking ahead to next week's holiday-shortened trading for Dec21 corn futures, we would consider movement within the $4.1675-$4.3325 per bushel range to be unremarkable. Notable moves would extend to the $4.0700-$4.4575 per bushel range. Price action beyond that would be extreme. We will return to publishing a chart of these levels versus price action after the new year. 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.

Looking at the Spring and Fall prices for crop insurance this week, both distributions shifted slightly higher due to this week's rally and higher implied volatilities. See below for distribution and cumulative probability charts for both the Spring and Fall crop insurance prices.

We will not be adding any new Tools and Tactics articles this week, but we would love to highlight two of our favorites, "Coining Some Terms" and "Risk Premiums." Of course, if you have gotten behind on our discussion of the Greeks, now might be a great time to catch up. We suggest starting with "Introduction to Delta."

Lastly, we would like to take a few seconds to mention that now is the time to be thinking about your 2021 marketing plan. We usually begin hedging for our Quartzite Precision Marketing clients in February while the spring crop insurance price is setting. The account opening process can take a few weeks, especially this time of year. That does not leave much room. We think it is better to be a week early than a week late. So, if you want to learn more, give us a call next week.

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Thanks for taking the time to read. We look forward to your questions and feedback. Please feel free to contact us via our contact form, Facebook, Twitter, email, or phone at (970)294-1379. Thanks again. Have a great week.

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