Corn futures have enjoyed a 50-cent rally in the past few weeks. Seasonally, a late spring or early summer rally is normal.
Depending on the weather in the coming weeks, that rally might continue with ferocious fanfare, or fizzle out quickly. Be prepared. When bull markets occur, it is easy to get swept up into the emotion and feelings of, “My crop won’t get planted. My crop will not grow. There is no way I can plant past a prevent plant date. There is no way this crop will make it if there is an early frost.”
Those emotions and comments are norma and these are very real concerns. It is these concerns that can make the corn price move higher. Just remember that there are pricing opportunities that will emerge along the way.
Let’s take a quick look back at history:
1. During the flood of 1993 and the cool and rainy summer that followed, December corn futures had a low of $2.25 on June 13, and then peaked at $2.61 on July 9. The market then traded all the way back down to $2.32-1/2 by Sept. 8.
2. During the slow planting year of 1995, followed by extreme heat that summer, December corn futures traded at $2.61-3/4 on May 15, and then peaked at $3.00-1/4 on July 17. The market then traded all the way back down to $2.70 on Aug. 8.
3. In 2012, during the drought, December corn futures had a low of $5.06 on June 15 and soared to $8.49 on Aug. 10. Prices then dropped $1.50 off the high by Sept. 28.
The point to remember is that market will rally hard and fast under the right market conditions, and this might become a year where we see that again. Be vigilant of those cash marketing opportunities as they arise. Be thinking about how you can also protect unpriced bushels.
This is when buying put options becomes an important tool at your disposal. The rally will be fast and furious; know where the upside targets are for corn futures. Keep track of the weather and the position of the fund traders. As quick as the rallies occur, they fade fast as well.
Editor’s note: Naomi Blohm is a marketing advisor with the Stewart-Peterson Inc. and she is a regular contributor to the Iowa Public Television series “Market to Market.” She can be reached at email@example.com.