With the prospective plantings report fast approaching traders will be focusing in on weather conditions throughout the Cornbelt. Though it is very early in the year, we like to use the Wayne Gretzky approach, which is skate to where the puck may be going, not where it is.
With the prospective plantings report fast approaching traders will be focusing in on weather conditions throughout the Cornbelt. Though it is very early in the year, we like to use the Wayne Gretzky approach, which is skate to where the puck *may* be going, not where it is. Now no one can predict the future, but this is a futures market and if youâre not looking ahead, thereâs a good chance youâre going to be left behind. The reason for the old saying âbuy the rumor, sell the newsâ.
Below is a look at top corn producing counties in the US for production year 2022. As you can see there is a concentration of dark green counties in Iowa and Illinois, which all together represent the top two producing corn states in the country with Iowa accounting for roughly 18% of production and Illionois not far behind.
As it stands right now, Iowa looks to be lacking moisture throughout the state, but even more so in some of the top producing counties. If this does not turn more favorable into the spring, we would think it would (and probably has already add some premium to prices, especially with Funds positioned the way they are.
As of Fridayâs Commitment of Traders report, Funds were net short 296,795 futures and options contracts, one of the largest net short positions on record. Broken down that is 173,777 longs VS 470,572 shorts. If Funds were not this short, the weather concern at this stage in the year would be less concerning, but itâs the potential of Funds being offsides that provides the real upside potential in this scenario.
2019 was the old record short position and as you can see from the far chart above, short covering happened extremely fast. Though the scenario was the opposite with concerns over flooding, the risk of short covering remains similar. Below is a price chart of the December 2019 corn futures contract which was trading near $3.75 at the time of their record net short position, just two months later, funds flipped to be net long 187,929 futures/options contracts which helped prices rally nearly a dollar. Ultimately, that volatility and uncertainty led to opportunities for participants on both sides of the market. Futures and options on futures can be a great tool to use in this environment, whether it be as a hedge or an outright position. If you want to talk specific strategies that might be suitable for you, our team is here to help! Clients also have access to a free desktop and mobile platform to execute trades on their own or just to monitor live prices and open positions.
