This week’s crop condition report released June 23 put corn at 74% good to excellent condition. This is 9% higher than one year ago.
The bears in the market are projecting the largest crop in twenty years. Last year this time, we bought long soybeans seven consecutive weeks going into the weekend on adverse weather conditions. This year corn is on the reverse, due to the almost perfect weather conditions.
Pollination Stage Is Key
But it is too early to get excited about big crops. Yields are made or lost during the pollination stage we have yet to enter. This is when corn needs two thirds of its growing cycle moisture to reach trend line yields. Should the heat dome in the southwest move to the Midwest grain belt and stay for an extended period of time December corn could move back to its old 5.18 highs.
Key Levels
But should this split jet stream stay in its same track through pollination, charts suggest December corn will move down to 3.90. 4.38 has been holding as strong support as it was the low from January 12 that started a rally to 5.18. A close under 4.38 sets up a test of 4.20. If 4.38 holds, the next resistance is 4.48 then 4.62.
Technically we have now taken away the entire weather premium rally which started January 12. Continue to trade corn based on the weather and its impact on crop development one week at a time. If they put in our weather premium high early off the cold wet spring, then they will put in the pre-harvest low early as well. We should expect a measurable harvest rally as end users, ethanol producers, feeders and exporters move in to get their share of cash grain that farmers have been holding on to tight for the last two years. Professional users cannot afford again to move into the cash market and pay big premiums as reflected on the Bull Spreads this year.
Trade Idea
For a longer term trade recommendation that provides coverage for either a bullish or bearish growing and harvest season pricing scenario, I propose the following trade or in this case option strangle. I propose simultaneously buying the December corn 4.00 put and the December Corn 510 call for 14 cents or in cash value $700.00 The risk on the trade is the price paid for the strangle plus all commission and fees. If weather remains optimal with big yields we could trade below $ 4.00 by harvest, if a heat dome over the Midwest emerges with little or no rain then I see the market rallying back near the old highs near 5.20.
Grains Webinar
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 pm central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for this week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup.
