Strategy Idea...Lock in $5 corn

SELLING JULY CORN AT $5.20 NOT $4.20

Deferred commodity months are a smoother ride at higher prices

If you look at the July 2026 corn futures contract, it is easy to see that for almost a year and a half, the prices have spent most of their time between $4.60 and $4.90. So, for all the questioning of the USDA report estimates, StoneX yield estimates, and fund inflows/outflows, that deferred contract had it right all along, while the front months were squeezing market participants on both sides. 

It takes some patience, but the odds are in favor of producers (and bearish specs) willing to accept some length in their hedging. Of course, without knowing exactly what this year's production will be and whether there is bin space to defer sales, the decision is a bit hairy. Nevertheless, it probably makes sense to lock in $5.00 corn for at least some of the production. 

This can be done by selling a July 2027 futures contract near $5.20, then buying a $5.75 call option for about 25 cents. This locks in a net sales price of about $4.95 minus transaction costs. In most years, this would be considered a success. As a kicker, the $5.75 call will be there to act as a re-own should this be the rare year in which prices take off into the $7.00s or $8.00s. 

SYNTHETIC JULY 2027 CORN PUT

BUY JULY 27 CORN $5.75 CALL

SELL JULY 27 CORN FUTURE NEAR $5.20

Cost = About 25 cents or $1250 plus transaction costs

Margin = $880

Risk = Limited to 80 cents for speculators ($4,000), this would occur if corn were above $5.75 at expiration, which would be unusual. Producers would have a roughly 80-cent gap in which they don't benefit from the appreciation of their cash corn holdings. Still, there is theoretically no risk if this is a bona fide hedge and the long call prevents a margin-call loop. 

Maximum Profit = Theoretically unlimited for a speculator, but a hedger is locking in a sales price of their cash corn of $4.95. 

Expiration = June 25 2027

DTE = 413

StoneX Platform Symbol:

ZCEN27

C.ZCEN275750

*There is a substantial risk of loss in trading futures and options. There are no guarantees in speculation; most people lose money trading commodities. Past performance is not indicative of future results. Seasonality is already factored into current prices; any references to such do not infer certainty in future price action. 

These recommendations are a solicitation for entering into derivatives transactions. All known news and events have already been factored into the price of the underlying derivatives discussed. From time to time persons affiliated with Zaner, or its associated companies, may have positions in recommended and other derivatives.

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