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Catch the fast corn rallies!

Ag Marketing IQ: Resting offers give 24/7 attention to your scale-up marketing orders in a time when grain prices track up in minutes and drop just as quickly.

Tyler Schau, Hedging strategist

May 16, 2024

4 Min Read
Corn falling through hands
Getty Images/Layne Kennedy

I try to live a somewhat active lifestyle. That is easier during the summer months.

In North Dakota, it gets cold in the winter and the sun sets around 5 p.m. Throw in televised basketball and football games, and it is easy to sit on the couch from September to March. With that sitting around, my scale doesn’t quite work right (at least that is what I tell myself). Discipline is required for me to stay active and keep feeling good throughout the winter.

Last fall and winter also tested my discipline in grain marketing.

You have likely heard from several brokers and consultants to have working orders to make scale-up sales into market rallies. The problem is those marketing methods have not worked since October. We saw very few meaningful rallies after Oct. 20 until the recent move higher following option expiration on March options.

Not only was a rally difficult to come by, so were the overnight rallies followed by mid-morning selloffs. Those overnight rallies are where a lot of resting offers get filled. A lack of overnight liquidity coupled with the momentum trading of AI machines can – and often – lead to highs coming in higher than they maybe should, as well as lows going lower than they should.

This brings me back to discipline.

It was easy to forget about resting offers on scale-up orders over the last six months, as it felt like those orders never filled, or those orders were void as the contracts that they were against went off the board.

Related:Capitalize on a seasonal corn price rally

Catch those short rallies

The market dynamics have changed, however, over the last three months. From October on, the market was focused on increased ending stocks and lower prices as managed money funds built a large short position in corn. As the unwind of those short positions has developed, December 2024 corn has rallied from a low of $4.46 on Feb. 26 to the recent high of $4.96 ¾ on May 15. That high occurred in the first five minutes of the morning trade after the coffee break (8:30 – 8:35 a.m. Central). One hour later at 9:30 a.m. Central, the corn market had sold off 8 cents and was trading below $4.90. If you had orders working at $4.96 ½, you would have made a sale. If you waited to see that price hit, and then called your broker, or merchandiser, or waited for them to call you, it would have been too late to hit the target.

We seem to be past the winter doldrums of heavy selling weighing on the market. Don’t infer from that comment that we are going to shoot higher. Uncertainty will step in as the market driver.

Some questions:

  • Has the wet spring caused enough of a planting delay to hamper yield potential?

  • Has the wet spring alleviated drought concerns that have created volatility in the last two growing seasons?

  • Will drought concerns in Russia create fireworks in wheat and spill over to all grains?

  • Just how many hectares is Brazil going to plant in 2024-‘25?

  • Is China Trade War 2.0 on the horizon?

I don’t have an answer to any of those questions.

What I do know is that uncertainty is alive and well. Uncertainty creates price swings that allow producers to get hedges on simply by having orders working above the market. It sure feels like it is time to get those orders working again if you haven’t already.

And it turns out my scale wasn’t broken. Time to get active again.

Please feel free to reach out to me at 701-987-6009 or anyone on the AgMarket.Net team at 844-4AG-MRKT. We’d love to hear from you.

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. AgMarket.Net is the Farm Division of John Stewart and Associates (JSA) based out of St Joe, MO and all futures and options trades are cleared through ADMIS in Chicago IL. This material has been prepared by an agent of JSA or a third party and is, or is in the nature of, a solicitation. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading information and advice is based on information taken from 3rd party sources that are believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. The services provided by JSA may not be available in all jurisdictions. It is possible that the country in which you are a resident prohibits us from opening and maintaining an account for you.

About the Author(s)

Tyler Schau

Hedging strategist, AgMarket.Net

Tyler Schau joined AgMarket.Net, the farm division of John Stewart & Associates, as a hedging strategist in 2021. He was previously at Kluis Commodity Advisors. Tyler earned his B.S. degree in Agricultural Business and his M.S. degree in Agricultural Education from Iowa State University. In 2009, his family moved to Almont, ND where he became the agricultural economics instructor and the Farm and Ranch Management degree advisor at Bismarck State College. His teaching focused on risk management for producers.

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