Since the February price low December 2024 corn futures have slowly rallied 50 cents, getting near the $5 price mark earlier this week. Can prices continue to climb higher? Or will the notion of 2-billion-bushel carryout stop the corn price rally in its tracks?

What’s happened

Supporting corn prices recently was the fact that the U.S. corn crop is slow to get planted due to a soggy spring. Also supportive are weather concerns in Brazil; too hot and dry in central Brazil on the Safrinha crop, and massive flooding in Southern Brazil. Global demand for corn remains strong, and in the most recent USDA report, global carryout was decreased slightly.

Something to take note of, while it is still early in the growing year, December 2024 corn futures did signal a “heads up” earlier this week, by posting a bearish key reversal on daily charts.

This bearish key reversal occurred near both the $5 price point and 200-day Moving Average, which was also in conjunction with the top of a two-year down trend line.

Does this bearish key reversal mean that the “summer high” occurred early? Time will tell, but it is a significant indicator for producers to keep a tight eye on things.  From here, it will take substantial new bullish news to justify a fundamental (and then technical) reason for December corn futures prices to climb above the $5 price point.

Related:Did we hit the ‘spring low’ for corn?

That bullish news could occur in the form of continued spring planting delay, a hot and dry U.S. summer, or a shrinking safrinha corn crop in Brazil.

From a marketing perspective

With the U.S. corn crop not fully planted, and the summer weather forecast undefined, farmers are unsure of this year’s production.  Uncertain performance for a crop growing in the fields (or not yet planted) is nerve-wracking for any producer. It is hard to market what you are unsure will grow. It makes forward contracting potentially uneasy because if the crop doesn’t grow, you’re still on the hook to deliver corn to the elevator.

But what if spring planting weather improves and U.S. farmers quickly wrap up planting? What if the summer weather forecast turns out to be pleasant rather than drought-filled? Improved weather conditions in the weeks ahead might weigh bearish on trader mindset, and push prices lower in the short term.

When you consider that December 2024 corn futures have rallied over 50 cents (especially as a 2-billion-bushel carryout remains a reality for now), a producer may want to protect this recent rally.

One way to do that is to buy a put option. Remember, if you’re buying a put, you’re protecting a price floor for your grain. And if the market should instead trade higher due to drought, you are not dealing with margin calls, and you are able to take part in the rally with your cash sales. However, if the weather turns “perfect,” you’ll be thankful you protected your price floor.

Related:4 steps to plan now to capture a summer corn rally

Another way to protect a price floor on unpriced corn is to use a short-dated option. Short-dated options are gaining more relevance and importance as a tool you might employ to help shift risk or manage opportunity. As with any marketing tool, you should measure the pros and cons. Let’s first explain what a short-dated option is and how it works.

The term “short-dated” refers to a shorter window before the option’s traditional last trading day, otherwise known as option expiration. You’re able to protect new crop December 2024 corn futures prices, yet with a shorter window of time.

For example, if you were to buy traditional December 2024 corn put, it would expire on November 22, 2024. With the short-dated options, you are still protecting December 2024 corn futures prices, but they cost less because they expire much sooner. Therefore, you’re paying less time-value in the cost of the option premium itself.

Full visibility of how short-dated options work (puts or calls and whether it is purchased or sold) and the associated risks are critical to understand for proper implementation. A big benefit is that short-dated options can provide farmers an opportunity to reduce out-of-pocket cost and still protect a price floor.

They may be useful for such events as upcoming USDA reports, near-term weather events, or any other situation where protection for a shorter period of time may be warranted. Because you’re buying a shorter time-period of coverage, they cost less and you’ll save money (relative to a traditional option).

Prepare yourself

Summer weather cannot be outguessed. Nor can grain marketing. However, the current reality for corn futures prices, is the United States is still dealing with 2-billion-bushel carryout, which may keep a lid on further price rallies in the short term.

Quite frankly unless spring planting delays turn into farmers taking “prevent plant” in June, or the rain stops, and the temperatures soar in July, we will still be facing the perception of 2-billion-bushel carryout into harvest.

We can never guess what a market will do or what Mother Nature has in store for us, but using risk management and being prepared to protect value is something within your control.

Reach Naomi Blohm at 800-334-9779, on X (previously Twitter): @naomiblohm, and at [email protected].

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