This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Thursday, August 28, 2014.
Throughout this entire growing season, I have heard comparisons to the best growing season on record, 2004. In that year we had bumper crops and maybe the best growing conditions seen in modern history. In that year, conditions were worse than where they are right now but actually rallied into the end of the year. With no weather problems on my telescope, I think we could see similar type of action.
Throw in the fact that we are entering a seasonal sell period in corn which performed very well in 2004 (prices fell from 242 to 205) and I think we may be looking to start a leg lower over the next few weeks. Because of this I recommend selling December corn into the weekend and holding through the WASDE and into the end of September. Unless we get a surprise, which is possible, I don’t think prices can hold these levels in the shorter term. Longer term, I think we rebound and eventually trade above 4.00 again, but shorter term I think we could see some more blood.
I know that we had similar type of conditions in 2009 and 2010, but Im throwing those years out because of the macro conditions and the fact that QE1 and QE2 were launched around this time period in those years. In fact, the end of the QE taper will be done in October, which makes downside pressure even more likely in my opinion.
2014 DEC CORN (BLACK) VS 2004 DEC CORN (BLUE)
I think the most simple and easiest trade to handle what could be a rocky start to Sep is to buy the October (trades off Dec price) 380 Put, for 16 cents. This option has a higher delta than the at the money options and with prices right around 368, 12 of the 16 cents represents intrinsic value, with only 4 cents being time value. I like using the option because I don’t have to worry about the stop out/ whipsaw. Of course, there are other ways to get short corn, call or email if you have any questions.
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