Weekly Analysis: Corn

2021-07-26T11:15:45-05:00July 26th, 2021|Grain|

Market Type: 3 (Less Bearish)

  • Trends
    • Secondary (intermediate-term): Down (3-wave pattern)
      • Bearish 2-week reversal on weekly charts the weeks of May 3 and May 10.
      • New 4-week lows the week of May 24
      • Wave B (second wave) of topped week of June 7
      • Wave C (third wave) has a target of $5.00
      • Noncommercial traders continue to liquidate their net-long futures position
        • Another 1,450 contracts for the week ending Tuesday, July 20
    • Major (long-term): Down
      • Bearish spike reversal on monthly charts are end of May
  • Fundamentals
    • Bullish
      • Dec21-to-July22 forward curve closed at a carry of 12.25 cents
        • Covering roughly 19% calculated full commercial carry
  • Seasonality
    • Bearish
      • Dec Corn 5-year tends to top first weekly close of June
        • Drops 14% through the last weekly close of August
      • Dec Corn 10-year tends to top first weekly close of June
        • Drops 11% through the last week of September
      • Dec21 posted a high weekly close of $6.3650 the first week of May
  • Price Distribution
    • Dec21 closed last Friday at $5.43
      • Putting it in the upper 22% based on weekly closes back through the 2008 contract
    • Dec22 closed last Friday at $4.9125
      • Putting it in the upper 27%
  • Implied Volatility
    • Moderate-to-High
      • Dec Corn ~ 32%
      • High volatility tends to reflect increased noncommercial activity
      • High volatility genially means option premiums are overvalued
  • Theoretical Positions
    • Producers
      • 2020-2021
        • All remaining cash could’ve been sold at the end of May
          • Based on major bearish spike reversal by the cmdty National Corn Price Index (NCPI, weighted national average cash price
      • 2021-2022
        • It’s possible 25% to 50% of expected production was priced at the completion of the 2-week reversal the week of May 10.
          • If so, the price would be roughly $5.40 (close the week of May 10)
        • It’s also possible 25% to 50% of expected production has been priced as Dec21 corn moved higher in its price distribution range
          • If so, an average of roughly $5.60 could be in place
        • The downside target for Wave C is at least $5.00
      • 2022-2023
        • It’s possible 25% to 50% of expected production was priced at the completion of the 2-week reversal the week of May 10.
          • If so, the price would be roughly $4.73 (close the week of May 10)
        • It’s also possible 25% to 50% of expected production has been priced as Dec21 corn moved higher in its price distribution range
          • If so, an average of roughly $4.90 could be in place
    • End Users
      • 2021-2022
        • Continue to cover needs hand to mouth given the secondary and major downtrends by the NCPI
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