Grain Spreads: July/Dec Corn

Sean LuskGeneral Commentary


Spot corn futures touched $5.40 overnight, the lowest since Feb. 16. May corn futures rallied to $5.59 ¼ earlier this week and at today’s week and monthly close finished at 547.4, up approximately 6 cents higher on the week. The potential for a buying exhaustion after falling short of the contract high $5.72 earlier this month could be concerning for market bulls. New-crop December corn touched a new high at $4.79 yesterday and contract highs for weekly and monthly settlements. Much of the selling in my view has been tied to strength in the dollar and fund liquidation ahead of month’s end. The market continues to find limited buying interest after yesterday’s export sales report. USDA reported old-crop sales fell to 453,300 MT in the week ended Feb. 18. That’s a new low for the marketing year and down 85% from the prior four-week average. China switched 68,000 MT to delivery to Vietnam and another 68,000 sold to unknown was switched to Vietnam. It is my belief such action raises questions about the big corn buying splash by China during the first week of President Biden’s term was political and not economic. I attached a July/Dec Corn chart here. Should these type of fears emerge or increase into Spring in that China decides to cancel old crop shipments and delay delivery into 21/22 or cancel outright, then I think selling old crop corn versus buying new crop could be a place to be. The counter argument to that strategy would be to watch soybeans. Their ending stocks are too low. Bad weather in Argentina that lowers production in S.A. could prompt a bean rally to 15.00. In that case I wouldn’t be bear spreading Corn. Beans given their position on the balance sheet are the leader in the grain sector in my view. Beans hold the key to corn’s future in my opinion as we enter into March.

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Sean Lusk

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