By Bill Reavis
Like this time last year, there is a spike in corn prices; unlike last year, there is no drought and the problem is too much moisture and rain. Although the crop is over 90% planted, continued rain in the northern corn-belt has caused many farmers to opt to preventive planting options or a revenue insurance policy. Heavy rain over the past two months has turned the corn market from bearish to bullish.
On April 1, the market saw a limit down day. This selling action was sparked by a U.S. Department of Agriculture report which forecasted record planting this summer. The report predicted record plantings due to a lingering inflated price of corn from last summer’s drought, giving the U.S. farmer incentive to plant corn instead of other crops. On that news, the market reached a low of $6.0575on April 5 in the near contract.
Since then, there has been an impressive trend reversal of 13%. From the recent low (above mentioned price of $6.0575), corn price, as of mid-day on June 19, has touched $6.8325. What happened since the USDA report? Supply dislocation…also known as Mother Nature working an excess of water in the fields, interrupting plantings and closing the window to get the balance of crops in the ground. The USDA projected planting acreage was revised today from 96.8 million acres to 95.2 million acres. Weather in the corn-belt the next two weeks will dictate planting acreage for the summer.
The Survival Plan and Diversified Commodity Basket both entered long positions earlier this week with active working stops in the market. Both investments look for “break-outs” in a basket of commodity markets looking to take advantage of medium to long term trends.
There is a substantial risk of loss in trading futures and options on futures contracts. Past performance is not indicative of future results. This material has been prepared by an AP of Postrock Brokerage, LLC and is in the nature of a solicitation, not a research report. You should not rely solely on this material in making trading decisions.
Bill Reavis has worked as trader and licensed futures broker since 2007. He is currently an AP with Postrock Brokerage, LLC dba Worldwide Futures Systems with the National Futures Association. Bill graduated with honors from Western Illinois University in Business Management and Economics. He has served as President of the Veterans Club at WIU and served on the academic review board for the WIU business department. He can be reached at: firstname.lastname@example.org.