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Volatility rules in corn trading

Agriculture.com Staff 11/30/2006 @ 3:08pm

The corn futures market is not for the faint of heart! During the last half hour of trade, volatility was king. In the electronic market, there were two periods where futures prices dipped to around seven cents lower. In pit trading, there was only one sell-off, as the pit was apparently caught flat-footed during the first break.

Prices were 10 cents apart between the two platforms. There are several stories circulating about what caused the breaks but they seem to center on the possibility that it was some sort of error.

Regardless, corn futures prices did close five cents higher on the March contract. This was a new high close and was close to where the market had spent much of the day. There is also still a bull spread to the market (nearby prices are higher than the deferred December 07 prices) which is a characteristic of strong demand markets.

The way the November soybeans have been able to keep pace with the December 07 corn futures contract, there is obviously still a battle going on between commodities to ensure adequate acreage. The market wants to try to attract corn acres, but not let the pendulum swing too far. The USDA reports in January will not answer the corn/soybean acreage question, but they will provide winter wheat plantings. Surprises in wheat acreage will lead to adjustments in estimated corn acreage, as the crop areas overlap.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

The corn futures market is not for the faint of heart! During the last half hour of trade, volatility was king. In the electronic market, there were two periods where futures prices dipped to around seven cents lower. In pit trading, there was only one sell-off, as the pit was apparently caught flat-footed during the first break.

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