A bountiful harvest and strong demand for U.S. corn

I am Stephen Davis, senior market strategist at Walsh Trading, Inc., Chicago, Illinois. You can reach me at 312-878-2391.

The price of corn futures so far this week is flat, likely in anticipation of tomorrow's release of the Crop Production report by United States Department of Agriculture (USDA) National Agricultural Statistics Service (NASS). An analyst survey by Reuters estimated yields at 182.4, down from 183.0 in July. 

Corn is past the pollination stage so a significant reduction in yield in the major growing states is unlikely, especially with rain predicted this week. Demand will need to exceed a bountiful harvest to move prices higher in the weeks ahead. Another government report - the USDA's World Agricultural Supply and Estimates Report (WASDE) - will be released tomorrow. This monthly report provides annual forecasts for supply and use of U.S. and world wheat, rice, coarse grains, oilseeds, and cotton.

That said, look for demand to be very strong for the rest of this year. That demand is likely to come from war-ravaged Russia and Ukraine and European countries suffering intense heatwaves expected to lower corn production. Higher demand for corn to produce ethanol and increased exports to Asian countries are also factors to watch. In my opinion, corn prices will go higher in September and October after the harvest.

One option trade strategy is to buy December 2026 corn $5.00 call at 7.4 ($375 per contract). Expiration is November 21, 2026. 

Another option trade strategy is to buy March 2027 corn at 480/580 call spread at 19.0, good til cancelled (GTC). That's $950 per spread. The most you can make on this is $5,000 per spread. That is an excellent risk/reward ratio. Expiration date is February 21, 2027.

To discuss trading strategies, contact me anytime. Have an excellent day. 

Stephen Davis
Senior Market Strategist 
Walsh Trading

Direct 312 878 2391 
Toll Free 800 556 9411
sdavis@walshtrading.com  
www.walshtrading.com

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