Export sales for corn came in at 1.172 million metric tons up 7% from the week prior and 37% over the four week average. Big U.S. corn buyers were present with Japan buying 306 thousand and Mexico 339 thousand metric tons. That is the second consecutive week of over 1 million metric tons despite old crop carryover being over double the year prior. This week’s number is neutral at best as the market won’t rally over it but it won’t break either. This leaves room for funds holding big short positions fat with profits to begin to cover. Trend following funds came in this week with a record short position of 265,394 contracts. With the USDA planted acreage report only 14 days away and thinking that farmers will plant more beans and less corn, coupled with an El Nino weather pattern bringing flooding to the southern delta where 15% of our corn is grown, there may be incentive for these funds to cover short positions. They may not want to be long the market but certainly not as short considering those two events.
Those looking for some bullish exposure in the corn market may consider the following trade. Using December 2016 options I would propose buying the Dec Corn 430 call while selling two 540 Dec Corn calls for 6.4 cents or in cash value $325.00. The risk on the trade is the price paid for the option spread plus all commissions and fees. The second risk is that this call ratio strategy requires selling an extra 5.40 Dec Corn call. Should this option get exercised on options expiration in late November, one would be short a futures contract at 5.40.
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 next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup. Or please contact me at anytime at slusk@walshtrading.com
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
