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Corn Volatility or Lack Thereof


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Opening the week on the positive side; the grain complex is feeling optimistic this Monday. However, the recent quietness continues to act as a dark cloud over the markets. Is this the calm before the storm or just more of the same? For the calendar year, front month corn has traded a 742 cent range with a high in July and a low in August and not much in between. Given the stagnation the market has experienced recently; trading less than a 200 cent range since September 1st, 742 cents seems like a lot but has been the smallest range seen in several years. With the USDAs November WASDE/Crop Production report now only three days away; will that be able to finally shake corn lose?

The average trade seems to be expecting more of the same with an expected corn ending stock to be near 2.366 billion bushels; slightly below the October estimate of 2.395 billion bushels. With harvest nearing the end for 2017, the winter doldrums appears to be well set into this market. Volatility is nearing record lows in corn, soybeans and wheat with the CBOT Corn Volatility Index closed the month of October at 14.28; the lowest monthly close since its launch in June, 2011. Only three months since the launch have traded below the 14.28 close. The months of April 17, February 16 and December 13 all traded below 14.28 but also experienced a greater range of volatility indicating lulls with periods of excitement mixed in; unlike this time where it is a never ending lull.

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Of the six Octobers that had a reported volatility, five of those years had even lower volatility ratings the following November. For now, being six days into November, the volatility is slightly higher, trading near 15.40 today. However, slow planting progress concerns appear to be off-set by sluggish demand. Export inspections, released each Monday morning, was disappointing again today. Reporting only 444,648 metric tonnes for shipments following last weeks weak 547,417 metric tonnes, the aftershock effect of South Americas bumper crop is still being felt.

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This Thursdays report will be another key test for the markets. The 340 level has been tested over and over again and for now, it has held. As harvest is wrapping up, the market is now transitioning into a new season which is mostly US demand and South American production and a black swan might just be hiding within. Eventually, something somewhere will change and the markets will respond to that change. What that spark will be is yet to be determined but the lull in these markets will not last forever. Even looking to crude oil, a market that is rallying in the face of massive inventories. Simple supply and demand doesnt necessarily mean up or down for prices. Just look the previous WASDE report for proof.

Until that spark occurs, the corn market appears to be well set into a sideways pattern. It has done so before and will do so again in the future. Producers and end users may be interested in learning more about the strategies we have in place during this lull as well as our outlook for the next marketing year. Feel free to contact me directly at 312-277-0119 or bgrossman@zaner.com Need help with a marketing plan? Sitting on unsold bushels and dont know where to go from here? Give me a call.

Brian


Brian Grossman
Market Strategist
Agricultural Hedging
Zaner Group, LLC
(312) 277-0119 -- Direct Line
(312) 277-0150 -- Fax Line
bgrossman@zaner.com
@AgHedgeGrossman
www.zaner.com

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About the author


Brian is a marketing strategist with Zaner Ag Hedge Group.  He grew up in Linton, North Dakota; born in 1988 and raised on the family farm.  He attended North Dakota State University and graduated in 2010 with a degree in Agricultural Economics with a focus on commodity marketing as well as a minor in Crop and Weed Science.  After graduating he returned to the family farm for the next five years before pursuing a career in commodity marketing.  Brian works with grain and livestock producers and end users of all sizes across the United States helping them develop risk management strategies. As a former producer who hedged through Zaner, Brian brings a unique perspective with vast experience on the client side of this industry. 

Feel free to visit with Brian about any marketing needs or thoughts at (312) 277-0119, bgrossman@zaner.com or follow him on twitter @AgHedgeGrossman

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Brian Grossman

Market Strategist

Zaner Group, Ag Hedging

(312) 277-0119 -- Direct Line

bgrossman@http://zaner.com/

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