I’m going to sound like a broken record today as this update is very similar to last week. More consolidation in the corn market and a lack of strong bullish or bearish news to justify a breakout. September corn is showing a strong consolidation pattern on the weekly chart (see below) as it currently trades inside last week’s price range. In the last market update, I advised traders to watch for changes in Monday’s Crop Condition Report. Well that report showed a drop in the good to excellent category from 64 to 62, most traders expected to see a drop to only 63, so this report was considered favorable to the bulls. As I mentioned last week, historically we usually see corn sell off around this time of year but so far that hasn’t been the case, instead the market searches for clear direction. The longer the consolidation lasts, the larger the move we expect to see, only time will tell. Watch for Monday’s Crop Condition Report to see if the Good/Excellent rating for corn slips again. I think the “real” move will come from the August 12th USDA Supply/Demand Report and Crop Production. Watch for the USDA to possibly lower yields from the 179.5 number, the big question remains, by how much?
Key numbers to watch in my opinion are: $5.81 ½ on the upside and $5.19 ½ on the downside.
I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility 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.