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CORN
BACKGROUND INFO
Planting
in the Corn Belt states of Iowa, Illinois, Nebraska, Minnesota and Indiana
tends to start in mid April and run through mid May.
In recent years, the majority of planting in the Corn Belt has
started by April 20th and been completed by June 8th.
Ideally, planting should be done when the temperature is moderate
and conditions are dry. If
the fields are either too wet or a late snow hits, then planting will have
to be put off. Late planted
crops tend to produce lower yields. Historically,
the probability of delay is quite large, so very often during planting the
Corn market begins to build a risk premium into the crop at this time.
 Several
days after the Corn crop has been planted, sprouts begin to emerge from
the soil. These sprouts grow
into the tall lanky plant we all recognize as Corn.
As the Corn plant matures, ears grow.
The kernel which grows inside the ear of Corn is a seed, and before
seeds can be produced, the plant must pollinate.
In order for pollination, the Corn ear produces a tassel, which is
used to capture pollen. Tasseling
usually occurs 10 days before the Corn plant begins to silk, or the
emergence of a silk like strand from the end of the ears.
Silking,
or pollination, is the most crucial stage of development of the Corn
plant. Pollination only
occurs when the crop receives an adequate amount of moisture and
temperatures are semi moderate. If
pollination does not go well, crop production will drop substantially.
However, once pollination has occurred, the Corn crop is almost
impervious to damage, and often referred to as a “made crop”.
The median date for pollination is the fourth of July, and hence
the Corn market tends to reach its maximum price by the first week of
July. In several years,
seasonal tops are put in by late May as the last of the new crop Corn is
planted. In most years after
planting, Corn prices tend to be weighed down by progress of the crop.
Only in years when severe droughts have interfered with pollination
have Corn prices continued to rise.
After
pollination, in late June and early July, the Corn kernels begin to form.
The kernels are said to have “doughed” when they are showing a
thick or dough-like substance. The
dough-like substance is filled with a milk, or protein.
It is the high protein content of Corn that makes it an attractive
feed, which accounts for the bulk of the demand for Corn grown in the
United States. As the Corn
plant concentrates its resources on making kernels, the stalk of the plant
begins to die. This causes
the entire Corn plant to die, and the kernels begin to dry up.
As the kernels dry out, the rounded end of the kernel not attached
to the cob begins to get a small impression in it, or a “dent”.
When roughly half of the kernels are showing dent, doughing is
considered completed. As the
Corn crop is doughing, the plant needs only minimal precipitation to
survive as long as pollination has occurred properly.
However, extreme heat, with little or no precipitation, can speed
up the denting process, lessening the protein content of the Corn grown
and, hence, its usefulness as a feed
(this situation is extremely rare).
Normally, the US Corn crop completes doughing by late September.
Denting,
or the drying and concentration of the protein, of Corn in the kernels
usually occurs from mid August through September.
Denting is said to be completed when all kernels are showing the
telltale dent and the ear is firm and solid.
There is no milk present in most kernels.
During the final stages of denting, the crop is susceptible to
early autumn frost damage. It
is not uncommon to see a retracement rally within the context of a greater
bear market during either the doughing or denting stages of development,
due to an extreme heat wave or an early frost.
The
Corn plant is considered mature when the plant is about ready to be
harvested with shucks opening and there is no green foliage present.
When the Corn plant is mature, it is considered safe from frost.
Corn typically matures from early September, for early planted
crops, to early November for late planted and replanted crops.
 After
the Corn crop has matured, it is harvested.
The bulk of harvesting takes place in late September through mid
October. Ideally, after the
Corn plant has matured, farmers like to see cold weather, and little or no
precipitation, so the ground is firm for the harvesting equipment.
When too much precipitation is present and the weather is
unseasonably warm, the ground can be too muddy for the heavy equipment
used in the harvest effort, and there is a potential for mold based
diseases and insect problems in extreme cases.
Harvest delays are typical, but very rarely do they result in any
real loss of supply.
Livestock
feed accounts for roughly 60 to 65 percent of the total use of the cash
Corn crop. In recent years,
corn has accounted for a quarter of all livestock used.
Corn is so attractive as a livestock feed for two major reasons:
- Corn
is good grain for fattening livestock and poultry because of its high
starch content. In
addition, it contains more oil than other cereal grains, making Corn
an excellent source of nutrients and a very high energy feed.
- Acre
for acre, Corn yields more animal feed in both grain and forage than
any other crop, although the cost to produce Corn in terms of labor
and equipment, is no more expensive to plant and harvest than other
cereal grains (and most other crops).
 Because
the main use of Corn is for animal feed, any significant increase or
decrease in animal production can have dramatic affects on the price of
Corn. With large and growing
animal numbers worldwide, the demand for Corn (and all grains) has been
tremendous in recent years
Corn
is also heavily used for industrial purposes.
Paper and wallboard are made from the stalks, while husks are used
as fillers. Cobs are used to
make charcoal, as fuel in burning, or processed into industrial solvents.
However, the kernel of the Corn plant is still the most valued part
of the plant for industry.
Corn
kernels are used for corn oil, starches, dextrin, syrup, adhesives, glues,
textile fibers, soaps, sizing, paints, varnishes, explosives, as well as a
host of other industrial and human consumption products.
The aforementioned materials are typically produced after the Corn
kernel has been processed by a technique known as wet milling.
Wet milling is when the Corn kernel is soaked in diluted sulfuric
acid for roughly 60 hours. The
hulls are now separated from the kernels which are used to make the
laundry list of items mentioned earlier.
Dry
milling is used to make cereals, flour, hominy, grits, feeds and various
industrial products. The
process of dry milling involves spraying the cornhusk with steam to soften
the cob, and then removing the kernels which are then ground.
With
the plethora of uses for Corn, it is no wonder that Corn is the most
widely exported commodity in the United States.
The United States is the world’s largest producer of Corn and the
world’s largest exporter. Considering
that the United States is also the world’s largest user of Corn, the
worldwide demand for Corn is astronomical.
The largest users of US Corn are China, the former Soviet Union,
South Korea, Mexico and Japan. Sales
to Eastern Europe have been expanding rapidly in recent years, as well.
Corn Futures
Composite Seasonal Chart
Chart
compliments of www.tntseasonals.com
Past performance is not necessarily indicative of future results.
Tax
selling of last year’s crop has tended to weigh on prices at the
beginning of the year, culminating in one of the best known seasonal
tendencies in the grain markets, the "February Break".
In recent years, the February Break has been highly unreliable, but
it is still worth noting. During
the production cycle of the Corn crop, the predominant feature is fear
that the crop will be damaged, thus reducing yields. An old grain traders
saying is “Grain crops are
killed 3 times a year”:
- Once
during the spring when it is too hot/cold/wet/dry for planting or to
emerge.
- Once
during the summer on fear of too little rainfall for pollination (this
is the potentially explosive rally in the summer.
Though highly reliable, this phenomenon is not for the timid as
draw downs can be quite large and volatility is great).
- Once
during the autumn on early frost or harvest delays.
After
each of these killers, prices tend to break as the market worries about
the coming supply. It is
normally in the break from these lofty, panic-inspired levels that the
trading opportunity lies.
SEASONAL
TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY
FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST 15 YEARS.
THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR
ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR
DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR.
EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT
IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND
LIQUIDATION MAY IMPACT ON THE RESULTS.
NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST,
OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS.
NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN
THE FUTURE.
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