Grain Markets Continue to Push to New Highs!

December Corn

Corn futures continued to move higher in the overnight trade, tacking on another 1% and reaching 530.  Overnight strength is in part to wheat futures gaining about 15 cents.  Yesterday afternoon (after the grains closed), there were some analysts pointing that the late day weakness in oil may be a drag on corn in the overnight.  However, that correlation has drastically diminished as you can see in the table below, coming in at just .17.  If volatility were to expand in oil and we saw a sharper move lower, that correlation would likely grow.  With a 14-day average true range for oil at 3.54, you'd need a bigger move to see that sympathy trade kick in.  

Now, back to corn.  Corn futures continued to make up for lost time, rallying largely because the market had underpriced upside risks for the last several months, as we've routinely noted. The market posted its fifth straight day of gains yesterday, which also made it 8 of the last 10 days higher.  In the early morning trade, prices are working to add to that streak.  Though we think prices can continue higher over time given the fundamental backdrop, things are technically overextended in the near term which gives cause for pause.  We often look at bullish/bearish sentiment as a throttle.  Low levels provide better "value" with well defined levels, while straight up rallies can create more risk that can turn irrational.   The RSI at 75.88 is the highest we've seen since March. Market's often go further than people think, so if you are trying to play for a retracement or protect long exposure (in the field or on paper), we'd recommend utilizing options spreads as a way to do that as it gives you defined risk parameters from the get go.  This is a popular strategy for producers wishing to keep the upside open, while protecting some near term downside risks. 

Technical Levels of Importance (December futures)

• Resistance: 547**, 561**
• Pivot: 525
• Support:  515-518 3/4***, 508 1/2-510 1/4***, 499-500 3/4***

Corn at 530 after five straight higher closes, RSI at 75.88, and a market that spent months underpricing upside risk. If you're long — in the field or on paper — you already know the tension: you don't want to cap the upside, but the near-term setup is stretched.

That's exactly the structure we've been building for clients. Which strikes, which months, what it costs, and how it fits your bushels or your position size — that's a ten-minute conversation with a broker, not something we can publish in a morning note.

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