Corn Cash Index: The National Corn Price Index (NCI, national average cash price) continues to hold near the long-term low of $4.4309 posted during November. Meanwhile, monthly stochastics are trolling in sharply oversold territory, nearer 0% than the threshold 20%. All this gives the market the appearance of waiting for a catalyst* to complete a clear reversal pattern. For now the NCI continues to follow the path laid out between 2010 and 2014 (slide 4), with new lows posted during October 2014. In between the NCI was able to rally through April 2014. Theoretical Positions: If cash needs were bought at the end of May, the previous suggestion was to buy put options as protection, establishing a synthetic call. Otherwise, continue to buy cash corn as needed only until a clear bullish reversal is completed.
December Corn: Here’s where the corn market gets interesting as the Dec23 contract went off the board and was replaced by Dec24 on the continuous monthly chart. The Dec23-Dec24 spread was at a carry of 51.75 cents as the 2023 issue expired, helping to create a new 4-month high on the continuous monthly chart as December came to an end. Do I believe this bullish reversal pattern? Not completely, no. However, from a purely technical point of view it did confirm a bullish crossover by monthly stochastics below the oversold level of 20% at the end of October. For this reason, the argument could be made the major (long-term) trend has turned up.
Theoretical Positions:
- Hedgers:
- Dec23 hedges were likely rolled to March24 at a strong carry.
- Dec24 and Dec25 hedges established during 2022 continue to be held. We will need to be careful if Dec24 completes a long-term bullish reversal on the continuous monthly chart.
- Continue to hold these hedges despite the reversal pattern posted during December. However, we will look for an opportunity to cover some of the positions with short-dated new-crop call options.
- Those not afraid of more risk could lift the hedges, then look to reestablish next spring/summer. If so, sell stops would be placed below the November low of $4.47.
Teucrium Corn Fund (CORN) extended its major downtrend to a new low of $21.47 during December. This was CORN’s lowest mark since January 2022 despite being sharply oversold, according to monthly stochastics. Trade volume continues to decline, opening the door to a potential rally at some point. Theoretical Positions: It’s likely there were no long-term positions in place at the end of November. Buy stops would be placed above the previous 4-month high of $23.24 (October).
* See my Weekly Column, “Waiting for Godot”, a reposting of a piece I wrote for DTN many years ago.
