Corn is a member of the grass family of plants and is a native grain of the American continents. Fossils of Corn pollen that are over 80,000 years old have been found in lake sediment under Mexico City. Archaeological discoveries show that cultivated Corn existed in the southwestern U.S. for at least 3,000 years, indicating that the indigenous people of the region cultivated Corn as a food crop long before the Europeans reached the New World.
Corn is a hardy plant that grows in many different areas of the world. It can grow at altitudes as low as sea level and as high as 12,000 feet in the South American Andes Mountains. Corn can also grow in tropical climates that receive up to 400 inches of rainfall per year, or in areas that receive only 12 inches of rainfall per year.
The U.S. grows Corn on such an enormous scale (333 million tonnes) that it produces almost three times more tonnes than the next leading country, China. The ability to harvest Corn so efficiently and on such a grand scale did not develop in North America until after World War II however, before which harvesting involved a huge, on-foot labor force. Despite our incredible domestic consumption of Corn in everything from fodder to ethanol production, the U.S. Department of Agriculture estimates that the U.S. still export about 1,859 million bushels of the crop to other countries.
Corn is used primarily as livestock feed in the United States and the rest of the world. Other uses for Corn are alcohol additives for gasoline, adhesives, corn oil for cooking and margarine, sweeteners, and as food for humans.
Corn futures are traded on the Budapest Stock Exchange (BSE), the Dalian Commodity Exchange (DCE), the Kansai Commodities Exchange, the Moscow Exchange, Rosario Futures Exchange, and the Tokyo Grain Exchange (TGE). Corn futures and options trade at ICE Futures U.S., the Bolsa de Mercadorias & Futuros (BM&F), the JSE Securities Exchange, the Mercado a Termino de Buenos Aires (MTBA), and the NYSE LIFFE European Derivatives Market.
The most popular futures and options market for Corn is at the Chicago Board of Trade (CBOT), part of the CME Group. The electronic futures contract trades on Globex from 7:00 PM CT to 7:45 AM Sunday through Friday. As well as the primary hours of 8:30 AM CT to 1:20 PM Monday through Friday.
One Corn futures contract is 5,000 bushels, or approximately 127 metric tons. The previous settlement price (November 11, 2014) for December 2014 Corn futures was 373’6, or $18,687.50 per contract. The most common contract symbol is ZC.
One futures contract price increment or “tick” is ¼ cents per bushel. A one “tick” move is $12.50. The next tick after 373’6 upward is 374’0 followed by 374’2. Therefore, a one cent move, from 374’0 to 375’0, is $50 and reads as three dollars and seventy-five cents or three seventy-five even.
The performance bond or initial margin requirement to initiate one futures contract position is $1,375 (as of November 11, 2015). To control that futures position going forward the maintenance margin becomes $1,250 (as of November 11, 2015).
The Daily Price limit is $.25 per bushel expandable to $.40 when the market closes at limit bid or limit offer. For example, if the market closes at limit bid of 398’6, on Wednesday, November 12, 2014, the next session’s Daily Price Limit would increase to $.40. If the following trading session fails to close at limit bid, the next session’s Daily Price Limit reverts to the $.25 cap. The exchange resets daily limits for Corn in May and November of each year, based on a percentage of the average settlement price of benchmark contracts during a roughly nine-week observation period.
The futures contract month listings are March (H), May (K), July (N), September (U), and December (Z). “New crop” refers to the December futures contract as that is the month in which the Corn in the ground is harvested or done being harvested. “Old crop” refers to the tradable contracts covering last year’s crop.
The futures contract’s Last Trading Day (LTD) is the business day prior to the 15th calendar day of the contract month. The December 2014 Corn futures contract LTD is December 12, 2014 for example. The First Notice Day (FND) for that same contract is November 28, 2014.
Significant fundamental reports to be aware of are the United States Department of Agriculture (USDA) Crop Progress reports, typically released at 3:00 PM CT on Mondays, and the periodic Crop Production and USDA Supply/Demand reports, typically released at 11:00 AM CT.
This particular market has the potential for volatile and large trading ranges due to fundamental factors.
Visit www.danielstrading.com for additional contract specifications and market information regarding the Corn futures market.
Sources:
www.barchart.com
www.cmegroup.com
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