My Plan If Corn Doesn’t Go To 4 Dollars

My Plan If Corn Doesn’t Go To 4 Dollars

Sep 25, 2017

Market Commentary for 9/25/17

 

Corn 

Corn traded within a 10 cent range last week, ending 1 cent lower than the previous week.  The Dec futures low at $3.44 continues to hold as the bottom for the year so far.  If this lasts for another week or two, there is a chance this will be the year’s low.

 

Early reports indicate yields are as expected or better than what farmers were thinking a month ago.  $4.00 will be difficult on the Dec or Mar futures if this yield trend continues.  I’m looking for corn to be range bound between $3.45 to $3.75 through Christmas.

 

Soybeans

Despite harvest getting into full swing this previous week, soybeans increased another 16 cents.  Basis levels continue to widen to last year’s harvest levels.  Spreads between contract months are still wide, indicating plenty of supply and encouraging storage.  This type of market action doesn’t make sense from a fundamental perspective and could be an indication that beans are looking at a seasonal top.  Based upon futures being down 10 cents this morning the market might be paying attention to fundamentals.

 

Brazil and Argentina bean planting has had a slow start due to weather, but there is still plenty of time.  Forecasts suggest better weather is coming.  Two weeks from now South American weather will be the most important market driver for soybeans.

 

MARKET ACTION

 

Added Profits From Selling Calls

Last Friday Oct options expired.  Following details the results of my Oct trades affected.

 

On 6/30 after the USDA report was released (Dec futures were around $3.85), I sold a $3.80 Oct call for 19.5 cents on 5% of my ’17 corn production.

What does this mean?

    • If Dec corn was above $3.80 on 9/22 – I have to sell corn for $3.80 and keep 19.5 cents ($3.995 total)
    • If Dec corn was below $3.80 on 9/22 – I keep the 19.5 cents to use on another trade in the future

 

On 8/24/17 (Dec corn was $3.55), I sold an Oct $3.55 call on 10% of my production for 8.5 cents

What Does This Mean?

    • If Dec corn was above $3.55 on 9/22 – I have to sell corn for $3.55 and keep the 8.5 cents ($3.635 total)
    • If Dec corn was below $3.55 on 9/22 – I keep the 8.5 cents to use on another trade in the future

 

What Happened? 

Corn closed at $3.535, so both options expired worthless.  I keep all the premium from both trades that I will add to a future…

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