Corn futures have been crushing it for the past month, as a number of factors have combined to push prices higher by approximately 39%. Since hitting a bottom on June 15th, Corn futures did nothing by soar until July 9th, when gains for the past month were around 45%. Though futures have cooled off in recent days (along with the weather) much of the damage has already been done. The sweltering heat wave that engulfed much of the nation dealt an especially painful blow to crop yields. In fact, the last 12 months have been the hottest period on record since the U.S. began keeping track in 1895.
The harsh weather and lack of rain has led to severe droughts, which has been the main culprit of corn’s rise. July is a key month for the commodity since the bulk of corn crop will pollinate – a crucial phase of the growing process that is particularly sensitive to heat. And with this month already recording some of the highest temperature levels in history, many farmers are already reporting serious corn crop shortfalls, forcing market prices to skyrocket.
Earlier this week, the “USDA, in a monthly supply-and-demand report, pared its estimate for this fall’s corn yield by a higher-than-expected 12% from its forecast last month, to 146 bushels an acre from 166 bushels an acre” write Owen Fletcher and Bill Tomson. This was a move that many had expected, however, leaving futures to trade downward by 2.8% in the trading that immediately followed. The following chart outlines the performance of corn futures for the trailing two months, shedding light on its astonishing rise.
Ways to Play
Those looking to cash in on this trend have a few options available to them. First, you can simply utilize the CBOT futures which offer exposure to corn, mini-corn, and corn calendar spread options. If futures contracts aren’t your cup of tea, take a look at Teucrium’s Corn ETF (CORN), which is the only exchange traded product to offer exclusive exposure to this buttery commodity. It should be noted that after a meteoric rise like this, a correction may be well on its way. For those who buy into that thinking, put options on standard corn futures will likely be your best bet. Keep you eyes peeled and trade accordingly.
Disclosure: No positions at time of writing.