Commentary
For 2023-24, USDA increased ending stocks 35 million bu. to 2.257 billion bushels. Total supply increased 35 million bu. amid bigger beginning stocks (old-crop carryover). Total use was unchanged with no usage adjustments. Corn market fundamentals remain negative in my opinion. Recently poor exports are pointing 2022- 23 carryout higher, which means larger 2023-24 beginning stocks. Which means in my view that a weather premium needs to be built to rally new crop prices. Weather to date has been very dry and the second look at crop conditions this week were verified as USDA rated 64% of the corn crop “good” to “excellent “as of June 4, down five points from the previous week. The portion of the crop rated “poor” to “very poor” increased one point to 6%. USDA left yield alone at 181.5. Personally, I think that is too high as is the carryout at 2.25 billion bushels. Rains need to show up to come close to these lofty yield and carryout projections. Therefore, I see yield being revised lower to 178/179 with production falling amid a lower carry-out. That said, a lower yield and carry out is one thing, but a consistent lack of demand is another. Should weather hiccups let’s say lower yield to 178.5 from 181.5 causing lower production, would new crop corn stage a rally to 5.80/6.20? Ending stocks would fall from 2.25 billion to perhaps 1.9/2.0 billion. Those potential ending stocks numbers are still ample regarding stocks to usage and amid current demand being lowered, prices for new crop corn could see any rallies faded quickly. Demand is going to need to emerge without a weather premium to hold prices or corn is going to need help from rallies in beans and wheat. Lots of “if’s and “maybe’s” in this piece, but projected carryout’s at or above 2 billion bushels in corn in years past have seen prices move from the upper left to lower right on the charts.
Trade Ideas
Futures-N/A
| Options-Dec 23 Corn at 5.30. Work to buy the Dec 23 corn 5.00 put and at the same time sell the Dec 5.90 call for even $$. ZCZ23C590:P500[RR] |
Risk/Reward
Futures-N/A
Options-Unlimited risk on the risk reversal as one is naked short a Dec 23 590 call. One may put a stop loss in at 12 cents risking $600 plus trade costs and fees. This type of position makes send for the corn producer, not so much for speculation.
Please join me for a free grain and livestock webinar every Thursday at 3pm Central. We discuss supply, demand, weather, and the charts. Sign Up Now
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall not be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
53 W Jackson Suite 750
Chicago, Il 60604