Return to Corn
On September 27, Bloomberg reported on what I feel (intuitively, and probably naively) was an inevitable plummet in the corn markets, due to the lower stocks and fragile demand patterns. “Corn for December delivery fell 0.8 percent to $7.19 a bushel at 8:07 a.m. on the Chicago Board of Trade, after touching $7.185, the lowest for a most-active contract since July 12.” [1] By the end of the week (according to September 30 TradeSim prices), December corn had risen again to 756.25. Similarly, December wheat had risen to 902.5 from its September 27 decline of ” 0.1 percent to $8.6825 a bushel in Chicago” [1]
The following day, corn rebounded; “Corn futures for December delivery rose by the 40-cent limit on the Chicago Board of Trade to close at $7.5625 a bushel at 2 p.m.” reports Bloomberg in its article, “Corn Futures Jump Most Since June on Unexpected U.S. Supply Drop.” [2]
Bloomberg also reports that “The USDA this month predicted a harvest of 10.727 billion bushels, a drop of 13 percent from last year and down from 10.779 billion forecast in August.” [2] This means that the upswing from Thursday’s low point, combined with greater demand than last year because of lower supply, will make December (and maybe March) futures contracts worth more.
Rabobank’s September report agrees, reporting Corn as Bullish and below normal stock levels. [3]
As of my trade on September 30, December corn contracts were selling for 756.25, and March contracts for 759.50. Since I am not confident enough to risk too many corn contracts, bought (long) two December contracts and look forward to seeing the market activity in both December and March contracts next week.
[1] http://www.bloomberg.com/news/2012-09-27/soybeans-set-to-gain-as-drop-to-seven-week-low-may-boost-demand.html
[2] http://www.bloomberg.com/news/2012-09-28/u-s-corn-stockpile-unexpectedly-drops-sparks-price-rebound-1-.html
[3] http://www.rabobank.com/content/images/Agri_Commodity_Markets_Research_Grain_Stocks_Sep2012.pdf