Corn Trades Higher, COVID Economic Impacts

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Corn Trades Higher, COVID Economic Impacts
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Turner’s Take: COVID economic impacts, Corn trades higher, CBOT up again on global weather concerns

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Q1 2021 hedge fund letters, conferences and more

"The U.S. economic recovery pace accelerated between February and April as COVID vaccinations increased and consumers returned to travel and other entertainment options," reports Daniels Trading Senior Commodities Broker Craig Turner, author of Turner's Take newsletter, and the host of Turner's Take podcast.

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investFor the first quarter of 2022, the Voss Value Fund returned -5.5% net of fees and expenses compared to a -7.5% total return for the Russell 2000 and a -4.6% total return for the S&P 500. According to a copy of the firm’s first-quarter letter to investors, a copy of which ValueWalk has been able Read More

"The real estate market in the suburbs is on fire as people are leaving cities for more open spaces. The price of lumber a year ago was about $300 per 1000 board feet. A year later and it is almost $1300. Part of the increase was due to the shutdown of the lumber industry during the COVID lockdowns. Now it is the high demand for housing outside of the cities."

Corn Higher On Global Weather Concerns

"Corn is higher to start the week as traders are concerned about the lingering dry conditions in Brazil for their second crop. Dry conditions in the Northern Plains have helped Minneapolis Wheat but there is a lot of corn planted up north, too, and that is supportive for old and new crop.

While problems exist with new crop, old crop will have to rally, too. Old crop ending stocks become new crop beginning stocks. The market will need to price ration both crop years to make sure the market has adequate stocks for the 2021/2022 marketing year.

$5.20 is resistance point for Dec 2021 corn and $6.00 for May Corn. Breaks have been shallow due to the uncertainty of the summer growing season and the idea new crop stocks will be tighter than old crop. The May WASDE will have supply and demand tables for new crop and has the potential to be a very volatile report.

Traders and hedgers looking for long exposure to new crop can buy the Dec 2021 corn $5.20/$6.00 bull call spread for about 25 cents. Not bad for an 80 cent spread, but not the best price I've seen either. Traders looking to lower the cost of the premium can also sell the Dec 2021 $4.70 put for 24.5 cents and almost get it to even money.

Traders should note any loss in Brazil corn production most likely comes back to the US as export demand. The market will be very sensitive to weather in the Ukraine, South America and the U.S. for corn production.

Traders looking for bullish old crop ideas can buy the July $6.00/$7.00 call spread and sell the $5.50 put for about a 2 cent debit."

Updated on

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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