Commentary-Rising domestic prices for new crop corn in Ukraine this week reflect concern about the possible negative impact of dry and hot weather on yields and overall output. Despite anticipation for a strong harvest, it is presumed that producers will hold onto their crop as basis levels rise there. The worry is producers will do the same thing they did with wheat in the Spring, hoard supplies until prices rallied. Chicago wheat rallied to 5.82 this Spring for a moment on this action in my view. This follows China, they have emptied their temporary corn reserve and have two remaining. This is a result of their weekly corn auctions totalling 4 million metric tons per week being released since late May. Their secondary or primary reserve is said to have 10 million metric tons, which is less than a month’s supply. Nobody knows for sure if they will dip into the permanent reserve, as no one for sure knows what is in it and the quality? Army worm infestations are invading their Northern growing area provinces, which could be a result of the monsoons in the South among other factors. This morning they bought 400K metric tons of corn from the US for 20/21 delivery along with 785K metric tons of beans. Corn barely budged today up a penny on the day. After the market closed, the Pro Farmer Tour concluded with national yield and production released A quick snippet of the findings: Corn: 177.5 bu. per acre, 14.820 billion bu. production. Pro Farmer says production and yield could go plus or minus 1%, which equals 14.968 billion bu. to 14.672 billion bu. and 179.3 bu. to 175.7 bu. per acre yield. The 177.5 is roughly 4 bushels per acre less than the USDA figures out Aug 1st. If proven true this could knock ending stocks to 2 billion when everone had a 3 billion bushel carry priced in a few weeks ago. This news may not incite a sizable rally but maybe enough to get the 125K managed shorts to cover. Below is the Dec 20/21 corn futures spread. If corn firms here, I look for a move towards the gap on the chart. Tight bet here. Risk 3 cents. Look for a move to 20 cents Dec 20 under from todays settle at 33.4 cents Dec 20 under. Three underlying reasons corn could push higher in the near term. Global basis levels rising amid hot and dry weather. China is running out of corn as their corn deficit grows. ProFarmer citing a smaller than expected US crop.
Trade Idea
Futures-Buy the Dec20/21 corn spread at 33.4 cents Dec 20 under.
Options-N/A
Risk/Reward
Place a tight stop at 36.4 cents risking approximately 3 cents or $150.00 plus commissions and fees. Im looking for a rally towards the gap at 20 cents Dec 20 under for a gain of 13 cents.
Please join me each and every Thursday at 3pm Central for a free grain and livestock webinar. 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 involve 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 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.