It’s Planting Time, and Time to be Bullish Corn
Corn prices retreated in May, but at this time of year, weather is critical, and plantings are facing delays. I think bullish options strategies are worth considering, as demand is tight and we need all the crop we can get for both food and ethanol demand.
The recent crop situation is one of not having a good deal of corn in the ground. Cool, wet weather has delayed plantings. Forecasts call for above-normal rainfall in the next two weeks, with some predicting precipitation at twice the normal rate in the central and western corn belt. With these wet conditions, roots tend to be higher, and it delays the entire growing season. If corn gets in the ground too late, there are critical stages in development that bring added weather risks. The onset of a drought will damage shallow root systems, and there could be a situation where frost could be a threat in the later stages.
Export demand remains solid in the U.S. and meeting crop expectations is critical. Watch for the U.S. Department of Agriculture’s crop progress report, out this afternoon. Planting is expected to be slower than normal for this time of year. That being said, I would recommend bullish options strategies for a move up. July corn futures are currently trading near $5.98 a bushel but I see prices a dollar or more higher by the end of the season.
You could buy the $6/$7.20 December call spread, which expires November 21. So you have time for the market to move. You could also buy the September $6.50 calls, which expire August 22, or consider selling puts.
Of course there are other strategies you can consider, give me a call and I’d be happy to tailor a strategy to your specific goals and risk-tolerance. Ask about our special 50 percent off commission offer for new clients too.
Phillip Streible is a Senior Market Strategist with Lind Plus. He can be reached at 800-803-8037 or via email at pstreible@lind-waldock.com.
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