After weeks of consolidation the corn market finally broke out yesterday when the USDA released its Supply/Demand Report and Crop Production Report. Last week I advised that the “real” would probably come from Thursday Reports, that proved to be the case. USDA lowered its yield from 179.5 to 174.6 which was below the range of estimates hence the strong move higher. Today’s price action has September corn trading inside yesterday’s daily range. I would expect the market to continue to push higher over the next week as the market carves out a new range now that we have better insight to the yield reduction. Short-term technical indicators have turned up suggesting it could be time to be long, couple this with the bullish fundamental news we received yesterday, and the bulls have a lot to be happy about. With that said, be cautious as the large trading ranges could come back into play and easily push “weak” longs out of the market.
In last week’s article I advised the key numbers to watch were $5.81 ½ on the upside and $5.19 ½ on the downside. Well, yesterday the market surged through $5.81 ½. This signifies a strong upside technical breakout in my opinion and should start the market on a new
I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility recently came down but is still relatively high compared to historical vol levels. You may want to incorporate some short options into your strategy in a calculated risk manner such as bull or bear option spreads. I have 25 years of grain market experience, please feel free to call me at 1-800-367-7290 for more details or to discuss in depth trading strategies. Also be sure to check out my past weekly grain market updates posted on our website.