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Corn Stuck in a Range

Published on Monday, January 7, 2019

If you've been watching the corn market as of late, well, as the saying goes, "it's like watching paint dry."  The corn market has been anything but exciting in the later half of 2018 and into the start of 2019.  Typically the January WASDE report adds a little excitement to kick off the year, but with the government in shut down mode, they will not be releasing the previously scheduled January 11th report.  Due to the significant nature of the report, I would suspect that upon reopening for business, that data  should still be released to take a final tally on the US crop production.  

However, until then, traders continue to use the December released data.  

Evaluating the corn market movement since the peak of our spring rally, at the end of May, the market has traded an ever tightening range. ( See Chart Below )

While this wedge formation cannot hold forever, it has the market captive for now.  At some point we will see this market break out to either side of the wedge.  While one can create a case for either a bearish or bullish move, the one thing that we do know, is that no one can predict the markets.  

In the lead up to spring, we will undoubtedly have headlines, weather reports, acreage estimations, and reports that will look to propel this market to break out one direction or the other.  

In anticipation of a breakout in this market, one should prepare by purchasing put options on all of your unsold 2018 production.  Should the market breakout to the downside before you are able to make sales, you will be thankful that you had placed a floor under these bushels.  Today a May, at the money, 3.90 put option is 15 cents.  Once your puts are in place, you now have the ability to breathe easy and place some sale targets at reasonable levels above where the market is today.  Make sure that these targets are not in jest, but actually placed with your local buyer.  I can't tell you how many times offers fill on the overnight session when no one is watching.

Now that you have a plan in place, let the market play out.  You've protected against a falling market and given yourself the opportunity for higher prices.  Let 2019 be the year that marketing your crop becomes a planned series of events and not a blind 'hail mary' in the final seconds with another crop breathing down your back.  We invite a call to help walk thru a strategy customized for your farming operation.  

Best Regards,
Britt O'Connell

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