Wednesday was the last day of July and the close in nearby corn futures that day was the lowest on a monthly continuation chart since October 2020. From a technical point of view, the next support area on nearby monthly corn futures is at $3.50. This is most likely an exhaustion leg, but exhaustion legs can be severe.
Fundamentally the crop is looking good. Areas in Minnesota are worse off than a year ago but most of the rest of the Midwest is in very good shape with good-to-excellent ratings near the highest levels in history for the month of July. The most recent carryover supply estimate is 2.164 billion bushels, but that is likely to move higher as we get closer to harvest. That estimate relies on a national average yield of 181 bushels per acre, which at this stage appears to be low.
The other key fundamental is the amount of old-crop corn yet to be moved to the market. While some will quickly point out that some has already been moved, the reality is most of it has not been priced. Those sales contracts have been rolled now into the September futures and thus September will continue to be under pressure throughout most of August. The only hope near-term for those who want to be on the bullish side is an early frost and that is a lose-lose proposition for everybody. It is very difficult to come up with any bullish “hope” in this type of a market.
Cash-only Marketers’ Strategy: Old-crop sales were wrapped up long ago at an average price of $5.47 and 50% of the 2024/25 crop was forward contracted long ago. Sit tight.
Hedgers’ Strategy: Old-crop sales were wrapped up long ago at an average price of $5.50. In the new-crop, we are short the December $5.00 calls at 20 cents on 20% of the crop but those are now trading at approximately two cents per bushel. While profitable, they provide no support at this point going forward. We also have 20% covered with a two by three put/call spread in the March futures by buying (2) $4.40 puts and selling (3) $4.40 calls. On Wednesday, we added to our short hedges by selling March 2025 corn futures on another 20%. That brings us to 40% hedged and 40% forward contracted. In addition, we are short December 2025 corn futures on 20% of the 2025/26 crop.
