Weekly Corn Market Update 03/27/20

December 2020 (Dec20) corn futures (the benchmark for new-crop corn) finished the week higher by $0.0100/bushel (~0.28%) to settle at $3.6425/bushel. This week's 10.25-cent (~2.82%) range in Dec20 corn futures was the smallest weekly range since the week ending February 28th. Price action stayed well within the unremarkable range we published last week.

The fundamental case we first visited two weeks ago was mixed on the week. April 2021 futures for Crude Oil rallied ~9.76% this week, but are still down considerably from a few weeks ago. Live Cattle futures for April 2021 posted a small gain of ~0.12%. April 2021 Lean Hog futures were down ~2.66%. The rumors we mentioned last week about ethanol plants potentially shuttering were realized this week with Valero reportedly shuttering plants and declaring force majeure on some of its contracts. We discussed counterparty-risk" briefly in our article entitled "The Premortem" and think now might be a good time to revisit that article.

On the technical side, Dec20 corn futures remain in a downtrend. Dec20 corn futures appear to be forming a bear flag while consolidating after the most recent contract low made on March 18th. We want to take a moment to mention that we don't put much faith in technical analysis and that we believe measuring and managing risk is a better strategy than speculating based on technical or fundamental analysis.

In the corn options market this week, we saw a small decrease in implied volatilities (the cost of options) from last week throughout new crop expirations. However, levels of implied volatility remain well-above those from two and three weeks ago. We continue to expect short term implied volatilities to stay firm ahead of the USDA's release of its quarterly Grain Stocks and Prospective Plantings reports on March 31st, and as we begin to enter the planting and growing seasons in the midwest.

Looking ahead to next week, we see a 54.10% chance that Dec20 corn futures will finish the week higher. We'd consider movement within the $3.5150-$3.7550 per bushel range to be unremarkable. Noteworthy moves would extend to the $3.3175-$3.9025 per bushel range. Price action beyond that would be considered extreme. We would not be surprised to see a noteworthy move this week following the USDA's Tuesday release.

Looking further ahead to the Fall 2020 Crop Insurance Price (the average settlement of Dec20 corn futures in October), this week's price action narrowed our expectations slightly while shifting them marginally higher overall. We believe there is a 56.89% chance the average will come in lower than this week's settlement of $3.6425/bushel for Dec20 corn futures. See the attached chart for a distribution of our expectations.

Thanks for taking the time to read, and we look forward to your questions and feedback. Please feel free to contact us via our contact form, Facebook, Twitter, by phone at (970)294-1379, or by email. Best of luck this week, and we hope you enjoyed this week's report.