It has been nearly a month since our last Weekly Corn Market Update on 10/23/20. As we mentioned at the time, we have spent the past few weeks rolling our systems over to the 2021 marketing year. Additionally, we have all but wrapped up the 2020 marketing year for our clients over the past few weeks. We have also been busy upgrading our website to make your experience better overall. Be sure to take some time to view our new "Tools and Tactics" section. There we have added some seed content and plan on adding more over time. Please take some time to look around and tell us what you think. Beyond that, we have been meeting with existing and potential clients. Now is the time to start thinking about your marketing strategy for next year, and we would be honored if you considered Quartzite. One of the more significant changes you will notice is that we have renamed our flagship marketing and risk management program for grain and soybean producers. While the old name was a good one, we think the new name, Quartzite Precision Marketing, is a better fit.

Learn more about Quartzite Precision Marketing

You will likely notice some changes in the Weekly Corn Market Update as well. The first and most obvious will be that we are switching the focus to December 2021 corn futures. Additionally, we intend to speak a little less about fundamentals and technicals and a little more on the options market. We intend this focus shift to bring the Weekly Corn Market Update more in line with how Quartzite manages risk. We decided to do this because prediction plays almost no role in our strategy. We would rather speak about our strategy's focus than speculation. That said, we think the Weekly Corn Market Update will look reasonably similar to the past with a few minor tweaks. As always, we appreciate any feedback you want to share. What do you like or dislike? What else would you like to see? On to the update.

December 2021 (Dec21) corn futures (the benchmark for 2021 corn production) finished the week higher by 4.75-cents (~1.18%), settling at $4.0825/bushel - the highest weekly settlement for Dec21 since January. This week's price action took place in an 8.25-cent (~2.04%) range. The week's high of $4.1150 came within a penny of tying a 52-week high.

One of the changes you will notice in the fundamentals section for this year is a streamlined version of the demand picture we used last year. Last year we referenced the change in April 2021 crude oil, live cattle, and lean hog futures individually. This year we plan to combine the three into a simple corn demand index. We will take a weighted average of the returns for April 2022 crude oil, live cattle, and lean hog futures. The weighting will be 50% for Crude Oil, 25% for Live Cattle, and 25% for Lean Hogs. We decided on that weighting because Crude Oil is a good proxy for ethanol, which accounts for about 40% of corn usage. Livestock feed accounts for roughly another 40% of corn usage, so combining cattle and hogs in equal percentages makes sense. That index was up ~1.03% this week. No discussion of the fundamentals would be complete without mentioning the increasing concerns over COVID-19 and uncertainty surrounding future executive branch policy and the Georgia Senate races. Any of those three factors might have a significant impact on the fundamentals.

Technically speaking, Dec21 corn futures remain in an uptrend that started from the August lows. Various momentum indicators on the daily and weekly charts are in overbought territory, with several displaying notable bearish divergences. The 52-week high of $4.1250/bushel looms just over the market.

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

The options market for the 2021 crop year is still relatively illiquid. We have not started hedging the 2021 crop in earnest yet. We hold a few near-the-money short-dated March puts to protect part of 2021 production until the spring price begins setting for crop insurance in February. Currently, we do not see any exceptional opportunities in the options market. We will be gradually looking to establish our core hedging positions for 2021 as we move closer to February

Looking ahead to next week for Dec21 corn futures, we would consider movement within the $4.0225-$4.1500 per bushel range to be unremarkable. Notable moves would extend to the $3.9350-$4.2650 per bushel range. Price action beyond that would be extreme. It will be a few weeks before we return to publishing a chart of these levels versus price action.

This year in the crop insurance section, we will publish similar charts to last year, with some additions. From the beginning, we will break the distribution into nickel-sized buckets and maintain that size throughout the season. Besides adding a distribution chart for the spring price, we will publish charts reflecting the cumulative probability of setting crop insurance prices above specific levels, again in nickel-increments. We received a request for these cumulative probability charts last year - let us know what you think. We want to take a moment to discuss how we produce these charts. Without going too deep down the rabbit hole, we essentially derive them from listed option prices. Options are fundamentally a bet on the forward distribution of futures prices. Using some math, we can see what the options market thinks that distribution looks like for a given period. In the end, these charts are a reflection of that information.

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.