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How to trade corn (in general) Monday 3/29/2021 03:35:00 PM GMT Tweet

The corn is one of the less volatile among the grains which makes it easier to trade and many say that if you can't trade, you should trade corn. Maybe that is why I'm into that market.

So how to trade corn?

The corn is planted in spring and harvested in autumn which makes it most volatile during that period of time. Traders, hedgers and farmers become very active during that time and they look for any threats that might harm the production whether it be the weather or any other factors and they will be very nervous and active during that time, bringing more liquidity and moves to the market. So here we pay closer attention at the supply - whether there will be good crop to deliver. On the other hand during the winter time there the market will be driven rather by the demand - whether there are enough buyers for the production that is already harvested and stored.

Currently being in spring, the planting season, we should discus the so called "planting intention" - USDA estimates how much acres US farmers are intending to plant with corn. This estimation will give us approximate understanding of the volume of the production in the end of summer/beginning of fall. But still this is just a rough idea and that is why it is called intended. The next important thing is to see what corn goes into production of - almost a half of the corn goes into production of ethanol (which makes bio-diesel) which make corn price very inter- and co-related ethanol and oil prices (higher oil prices - bigger demand for cheaper alternatives as bio-diesel). The other half goes for live stock feed and only a very small portion goes for human consumption. After corn being planted we start looking at weather during summer months. Heats and droughts in summer months in US mid-west are no friends of corn. Such news would damage the crop and reduce harvest yields which of course would drive prices higher.  Respectively good weather conditions in Iowa, Nebraska, Illinois, Indiana and Ohio would result in better yields and prices could go lower on bigger supplier. So to sum it up - the summer is about supply. Based on above the highs of corn during the year are seen during June and July; however this is just generally speaking and this is not a rule at all. The winter, on the other hand, is more about the demand. It is rather more quite time, less volatile without big spikes in price.

For me it is the most appealing trading corn using futures contracts; however the very same market can be traded as options, spreads, CFDs or ETFs whatever is best for the trader.


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