Corn Market Snapshot
Corn demand data continued to show strong numbers this past week. The weekly EIA data showed ethanol production setting a new all-time weekly record. With stocks only increasing a modest 1 million gallons. This is in part due to the large export program ethanol has had.
Currently USDA has corn used for ethanol demand at 5.450 billion bushels for 2024/25 marketing year. RJ O’Brien’s estimate remains at 5.500 billion bushels. They’ve noted that they feel comfortable at this point with their estimate.
Corn Export Sales
Export sales were at the lower end of expectations this week at 51.8 million bushels. This should not come at a shock considering the dollar index has gone completely vertical in each of the last 7 weeks. This won’t last forever. 107.35 is an area we are watching to hold this market down.
With how strong our exports have been, it is estimated that we need to average a weekly sales of 24.9 million bu to meet the USDA target. This compares to 32.5 million last year at this time.
Corn 2024 Crop
Corn Found support this week at the 50% retracement of the rally from 3.99 low to the high of 4.3475.
We are still anticipating a move up into the 4.40s. Before producers are force to either roll or price December basis contracts. Our targets are listed below but we have likely been working with you individually over the past few weeks to get these in on a farm-by-farm basis.
For those of you with most of your bushels in storage, we still have working orders in at 4.54. March futures. Keep this around 20-25% of production, but no more.
I listed the 4.64 target up at a higher level. I don’t want to rely on this target to get the December basis contracts priced. As we run into a time constraint with futures expiration, but I want to illustrate that the 4.64 level represents a common 61.8% Fibonacci extension of the wave pattern that we believe we are in. Looking at the March contract this same level would come in a 4.82.
First order we want to get December basis contracts cleaned up, so we don’t have to roll at the elevator as they charge too much to roll and they hold 30% margin vs 10% in the futures accounts.
2025 Corn Crop
As far as expenses go, we do not see much for costs coming down and given what we are seeing for the 2024 crop prices. We want to avoid pricing 2025 at these levels. Labeling the 61.8% extension from our initial bounce off the lows in August we want to be targeting 2025 in the 4.70-4.79 area.
I ran some quotes on 3-way producer strategies that gave downside protection and allowed for upside still. Below is the scenario:
If December 2025 board gets to 4.75 in roughly 30 days, we can execute
Sell 520 calls.
Buy 470 puts .
Sell 420 puts .
For 1.25 cent per bu credit back to you.
This would give producers upside to 5.20 Dec. Price protection from 4.70 down to 4.10. If the December board falls below 4.10 and stays, there until expiration then you would have 60 cents per bus equity.
We like this strategy for getting protection on when forward marketing an extended distance in the future. Many of you have used these before.
For expert advice on navigating the challenges in the commodity market. Contact our Commodity Brokers for tailored guidance.
Disclaimer
The risk of loss in trading futures and/or options is substantial, and each investor and/or trader must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades. Statistical services, and other sources that Paradigm Futures believes to be reliable. We do not guarantee that such information is accurate or complete, and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice given will result in profitable trades.
