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Tuesday, February 14, 2023 8:50:17 AM
Corn Volatility
By: Barchart | February 14, 2023
Last week the CME corn curve traded mostly steady with the front and old crop contracts leading. The March’23 contract closed +$3.00/bu and May was +$2.75/bu. The fundamental data continues to show lackluster domestic demand and incrementally encouraging export orders.
Aside from a -25 mbu decline in corn used for ethanol, the February WASDE report on Wednesday did not present any material changes to the balance sheet that would alter the price projections for July or December corn futures. Brazilian corn production was unchanged at a record 125.0 mmt and raised exports by 3.0 mmt to a record 50.0 mmt. It was no surprise that Argentina production was reduced by 5.0 mmt to 47.5 mmt. The country’s exports fell by 5 mmt to 35.0 mmt. This would be the lowest harvest and export program since MY 17/18. On the surface, the weakening Argentina crop can present bullish undertones for US corn futures, but the 2.0 mmt increase in Ukraine exports is a bearish signal and a stark reminder that global end users have choices.
Historically, implied corn volatility starts to accelerate rate over the next two weeks , driven by growing uncertainty about the upcoming US planted acres, the size and marketability of corn produced in the southern hemisphere, pace of the US export program, US weather outlooks and US stocks. Currently, we see the global corn risk paradigm pointing to lower prices for MY 23/24 corn. While Ukraine will still command a geopolitical risk premium, we believe that owning volatility headed into the key market-moving data points in February and March can be advantageous.
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By: Barchart | February 14, 2023
Last week the CME corn curve traded mostly steady with the front and old crop contracts leading. The March’23 contract closed +$3.00/bu and May was +$2.75/bu. The fundamental data continues to show lackluster domestic demand and incrementally encouraging export orders.
Aside from a -25 mbu decline in corn used for ethanol, the February WASDE report on Wednesday did not present any material changes to the balance sheet that would alter the price projections for July or December corn futures. Brazilian corn production was unchanged at a record 125.0 mmt and raised exports by 3.0 mmt to a record 50.0 mmt. It was no surprise that Argentina production was reduced by 5.0 mmt to 47.5 mmt. The country’s exports fell by 5 mmt to 35.0 mmt. This would be the lowest harvest and export program since MY 17/18. On the surface, the weakening Argentina crop can present bullish undertones for US corn futures, but the 2.0 mmt increase in Ukraine exports is a bearish signal and a stark reminder that global end users have choices.
Historically, implied corn volatility starts to accelerate rate over the next two weeks , driven by growing uncertainty about the upcoming US planted acres, the size and marketability of corn produced in the southern hemisphere, pace of the US export program, US weather outlooks and US stocks. Currently, we see the global corn risk paradigm pointing to lower prices for MY 23/24 corn. While Ukraine will still command a geopolitical risk premium, we believe that owning volatility headed into the key market-moving data points in February and March can be advantageous.
Read Full Story »»»
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Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Caveat emptor!
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