Corn prices are at three-year highs from delayed plantings. The market is poised for its biggest monthly gain since 2012. And there’s a good chance you can still profit if you had missed the rally so far.
That’s all the good news.
Now, for the not-so-good news: Corn prices could see extreme swings in the coming days, weeks and months from weather changes.
So, if you’re planning to get your feet wet in this market, beware.
Volatility Is 'Sky High', Warns Seery Futures
That’s the caution from Mike Seery, a specialist in commodity futures technicals at Plainfield, Illinois, who wrote in a report on Wednesday that volatility in corn
“is sky-high at the present time, all due to the fact of terrible weather conditions in the Midwestern part of the United States.”
The founder of Plainfield-based Seery Futures said Wednesday’s 25-cent swing in corn futures—where the front-month July contract on the Chicago Board of Trade went from a peak of $4.38 per bushel to a low of $4.13—was unusually wide by the market’s standards.
Said Seery:
“I am in the state of Illinois which rains every single day and we have heavy rain in the forecast over the next several days as there is no planting taking place in the area that I reside.”
Only 58% Of Crop Planted, Against The 90% Average
“I do not believe we will plant 100% of the corn crop in 2019. The volatility in corn will certainly remain extremely high over the next several months as we are at a critical juncture for corn planting, as I still believe there will be more acres shifted into soybeans. Soybean planting is only at 29%, behind schedule as well, as we have a real problem across the board.”
Crop progress reports issued on Tuesday by the U.S. Department of Agriculture shows corn farmers having only planted only 58% of the crop, experiencing the slowest pace on record that is well behind the 90% average. Crop emergence, meanwhile, is at only at 32% of the normal pace of 69%.
The resultant squeeze on this season’s corn harvest could be a constraint to industries that depend on the grain, including the packers of livestock feed and those that manufacture starch, sweeteners, corn oil and beverage, as well as the distillers of industrial alcohol and fuel ethanol.
Anticipation of supply tightness in all these has led to milestones not seen in quite a while in the corn market. Wednesday’s $4.38 per bushel high was a peak since July 2016. The front-month contract is poised to finish May 18% higher, the largest monthly gain since July 2012. Corn is also the best-performer among CBOT grains this year, with an annual gain of 11%, versus a 3% loss in both soybeans and wheat. Even more phenomenal is the fact that the corn rally itself is less than five weeks old.
Investing.Com’s Daily Outlook Has 'Strong Buy' On Corn; Projects Another 10% Gain
Investing.com’s daily technical outlook rates July corn a “Strong Buy” and projects a top level resistance of $4.58 for the contract—which, based on Wednesday’s settlement of $4.18, leaves room for another 10% gain.
Indeed, higher prices are likely for corn, said Jack Scoville, vice-president at The Price Futures Group in Chicago and author of the brokerage’s daily report on grains.
Said Scoville:
“The chart shows that the trends are changed and that higher prices are possible, with moves to about $4.75 on the nearest futures a possibility.”
While corn futures could continue to outperform now, prices could fluctuate later from the global situation, he said, adding:
"There is a good crop coming in Brazil and Argentina, so the U.S. will have competition for sales."
Dan Hueber, who writes The Hueber Report on agriculture out of St. Charles, Illinois, said planted corn seeds were sitting in soppy soils in most parts of the Midwest, and any idea of a trend line or better yield would seem improbable.
Said Hueber:
“Do understand, my intention here is not to build up the hype anymore that it has already, particularly seeing that corn prices are pressing up against the upper range of trade for the past five years, but it is challenging to think we will witness anything more than quick corrective and possibly volatile breaks until we have reached out to get a look at the pollination period in July."
“Weather markets are always a challenge because we are contending with the unpredictability of Mother Nature, and this one has shaped up to be one for the record books. I guess I can be thankful that I lost most of my hair years ago and this summer would appear certain to take the rest of it.”