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Corn Volatility Highlighted by Year-High and Year-Low in July

In recent weeks, volatility in the grain markets has significantly increased from this past winter, when price activity was range-bound and considered relatively dead. This month alone, December corn futures reached a new calendar-year high and a new calendar-year low. Wheat prices have skyrocketed as of late, particularly Minneapolis wheat, which rallied well over $3.00. November soybeans have recently recovered from near $9.00 to $10.00 on weather uncertainties.
As prices move and volatility picks up, you will need to look for opportunities to take advantage of prices that could escape rather quickly. As a reminder, over the last two years, corn futures rallied during the month of June only to quickly fall apart, beginning downtrends that lasted into the harvest season. As prices have recently recovered in all three markets, pay close attention to weather forecasts.
Consider forward contracting or using hedge-to-arrive contracts on price rallies, and at the same time buying puts. World supplies of all three commodities are termed adequate, to perhaps more than ample. If this year’s crop production in the U.S. (as well as other Northern Hemisphere countries) improves during the second half of the growing season, prices could turn defensive. By selling only half of your crop, the other half can participate on a price appreciation rally. If you’re worried about grain that you forward sold, consider purchasing out-of-the-money options. A balanced approach will be paramount.
If you have questions or comments contact Top Farmer at 1-800-TOPFARM, ext. 129.
Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

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