Seeking Alpha

Report buyers get burned as corn moves 1.3% lower on the day, a full $0.40 off the level hit in...

Report buyers get burned as corn moves 1.3% lower on the day, a full $0.40 off the level hit in the minutes after the USDA confirmed what everyone has known for weeks - the harsh weather is hurting the crop. Beans and wheat remain higher, but also sharply off post-report levels.
Comments (12)
  • User 502794
    , contributor
    Comments (122) | Send Message
     
    1st drop of rain in the forecast and corn will be limit down for a week
    11 Jul 2012, 12:36 PM Reply Like
  • hayekvonfriedman
    , contributor
    Comments (570) | Send Message
     
    Agreed. There will be a new record price per bushel if the harvest ultimately comes in below 140 billion bushels as here will be a rationed allocation between ethanol use and food use. Watch for rain on a daily basis.
    11 Jul 2012, 01:05 PM Reply Like
  • Atkins
    , contributor
    Comments (1037) | Send Message
     
    Speculation by hedge funds is certainly a driver of the increase in the price of corn (the commodity, not the ETF) at the moment, and the speculators will not hesitate to move out quickly when they hear the word "rain," so your prediction is certainly possible; however, the trend for the remainder of the year suggests a much-higher upside in this commodity.

     

    Anything less than sustained rain, which is not in the meteorological models for the Midwest, will not adequately increase the ground moisture level; every farmer and ag expert (but not analysts, who generally have only a basic understanding of the actual commodities upon which they "report") inherently know this fact.

     

    The USDOA just declared most of Southern Illinois -- the epicenter of corn fields in a state that is the second highest corn producer in the US -- a natural disaster area. Southern Illinois received several spot showers last week from a front that rolled through the area, but the crop is too far gone for showers to help. Proof is in the pudding (which, in this case, is bone dry).
    12 Jul 2012, 10:08 AM Reply Like
  • hayekvonfriedman
    , contributor
    Comments (570) | Send Message
     
    Tha is below 140 bushels per acre.
    11 Jul 2012, 01:17 PM Reply Like
  • irish_bob
    , contributor
    Comments (410) | Send Message
     
    how come the ETF which tracks corn on the LSE is only down .06% , im begining to distrust this TEUCRIUM fund more and more , volume is tiny compared to its sister on the LONDON exchange
    11 Jul 2012, 01:58 PM Reply Like
  • hayekvonfriedman
    , contributor
    Comments (570) | Send Message
     
    Contango and tracking error. It's an ETN. As of 2;15 EST CORN is down 3.24% while spot corn is down 3.66%.
    11 Jul 2012, 02:16 PM Reply Like
  • irish_bob
    , contributor
    Comments (410) | Send Message
     
    you are correct about the tracking error re_ CORN.L on the lse and i also forgot to account for close of trading in europe but are you sure corn.L is an ETN ? , listed under etf,s
    11 Jul 2012, 04:01 PM Reply Like
  • hayekvonfriedman
    , contributor
    Comments (570) | Send Message
     
    You are correct and according to Morningstar excerpted below it attempts to mitigate contango/backwardation effects by rolling contracts only five times per year. I must have been thinkig oftheir Partnership structure:
    "
    Like most commodity funds, CORN invests in futures contracts and does not hold physical assets. The fund invests about a third of its assets in three different corn futures contracts that trade on the Chicago Board of Trade. Corn futures contracts traded on CBOT expire on a specific day in five different months--March, May, July, September, and December. As a result, the fund will roll its contracts five times a year, but because of its structure, it will roll only about a third of its contracts at a time. This structure can reduce, but it won't eliminate, the effects of contango or backwardization.
    This fund is structured as a partnership, so shareholders will receive K-1 forms (instead of 1099 forms), which will inform shareholders of their pro-rated share of the fund's gains and losses from the purchase and sale of futures contracts. If there is a gain, shareholders will incur a tax liability, under which 60% of the gains will be taxed at the long-term capital gains tax rate, and the remaining 40% will be taxed at short-term rates at the end of every year, regardless of shareholders' holding period. If the fund generated losses, the shareholders' share of tax losses may be used to offset other income. Upon sale of shares, the investors' cost basis will be adjusted to reflect gains or losses already reported and will be liable for capital gains taxes.
    Investors in this ETF should have some understanding of the main drivers of corn prices, including public policy regarding ethanol and global corn harvest forecasts."
    11 Jul 2012, 04:11 PM Reply Like
  • irish_bob
    , contributor
    Comments (410) | Send Message
     
    is teucrium much different than that etf i refered to on the london exchange ( CORN.L ) , both roll over contracts , the london one is much cheaper and has much higher volume
    11 Jul 2012, 05:19 PM Reply Like
  • swmud
    , contributor
    Comments (6) | Send Message
     
    again the top is in,,, another report that should've fed the bull. He's not interested in the same old feed. You got a reversal, a candlestick hammer, new high in contract but not in the Wilder RSI, Stochastics. If it looks like a duck.........
    11 Jul 2012, 04:35 PM Reply Like
  • hayekvonfriedman
    , contributor
    Comments (570) | Send Message
     
    Yes. It is very much a technically deriven market until the weather issue clears up (pun intended) and price, volume, open contracts aggregate most of that.
    11 Jul 2012, 06:00 PM Reply Like
  • Atkins
    , contributor
    Comments (1037) | Send Message
     
    As I noted above, any rains will arrive too late to support a decent yield. Check the meteorological models, and talk to the boots on the ground (i.e., farmers and elevator operators). The only real "unknown" is soybeans, which have more strength and time to grind through the heat and parched earth.
    12 Jul 2012, 12:23 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|