Monthly Analysis: Corn

2023-08-01T11:58:51-05:00August 1st, 2023|Monthly|

Sticking with last month’s Analysis: The monthly close-only chart of the cash index I track for basis and monthly available stocks-to-use continues to follow a similar path to what was laid out between the 2010-2011 to 2013-2014 marketing years, with the R-squared correlation at 66.5% at the end of July 2023. This 4-year timeframe has seen the index running ahead of 10-years ago, with the high monthly close occurring at the end of April 2022 ($8.00) versus July 2012 ($7.97). A decade ago the cash index posted a low monthly close of $3.37 at the end of July 2014, 24 months after hits high. If the timeframe remains the same, the cash index would post its next low at the end of April 2024. 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.

December Corn: Dec23 continues to post wide ranges on the continuous (December corn only) monthly chart. Technically though, Dec23 did complete a bullish spike reversal during July given the higher monthly close of $5.13. This would confirm a new major uptrend signaled by the bullish crossover by monthly stochastics below the oversold level of 20% at the end of May and again at the end of July.

Theoretical Positions:

  • Traders: Short Dec 23 positions (see below) could be lifted near the July close of $5.13 for a gain of roughly $1.01.
    • New longs may have been established at the same price
    • If so, sell stops would be placed below the July low of $4.81
    • And we need to keep an eye on the Dec23-Dec24 futures spread that has collapsed to a carry of 4.25 cents at the end of July.
  • Hedgers: I’m not crazy about lifting short hedges at the end of July. Harvest pressure could push Dec23 back to near its July low during August and September.
    • Insurance floor prices could be found between $5.00 and $4.70.

Previous Theoretical Positions:

  • Short Dec23 from roughly $6.1425 (November 15).
  • Previously short Dec22 from the May close of $7.1150
    • Bought back on November 15 at $6.6675 for a gain of 44.75 cents
    • Raising the short Dec23 position to roughly $6.59
  • Previously Sold Dec22 $5.90 put options for approx. 56.0 cents (July 13)
    • Stopped out at approx. 6.0 cents (September 23) for a gain of roughly 50.0 cents

Similar to Dec23, Teucrium Corn Fund (CORN) completed a bullish spike reversal on its monthly chart during July. This confirmed a new major uptrend, coinciding with a bullish crossover of monthly stochastics below the oversold level of 20%. Theoretical Positions: New longs could be established near the July settlement of $23.09 with sell stops below the July low of $21.74.

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