Monthly Analysis: Corn

2023-09-04T12:10:53-05:00September 4th, 2023|Monthly|

Corn Cash Index: The monthly close-only chart of the cash index I track for basis and monthly available stocks-to-use provides the clearest picture of a major (long-term) trend for the market in general. The index 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 increasing to 67.4% at the end of August 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 failed reversal patterns, with July’s bullish spike reversal erased by a move to a new lo w of $4.7350 during August. Monthly stochastics remain sharply oversold, though this would not be expected to slow commercial selling through the early part of harvest. Based on the major downtrend of the cash index, the most logical read is for Dec23 to remain in a downtrend as well.

Theoretical Positions:

  • Traders: Investors have likely been chopped up the last few month. Based on my analysis there are no positions at the end of August.
  • Hedgers: Continue to hold December short hedges with the idea of rolling out to deferred on stronger carry.
    • Due to basis risk, some bushels can be sold at harvest with short hedges lifted.
    • 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

Teucrium Corn Fund (CORN) completed a bullish spike reversal on its monthly chart during July. While CORN sold off during August,  it held the July low of $21.74. Theoretical Positions: New longs could’ve been established near the July settlement of $23.09 with sell stops below the July low of $21.74.

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