For once, interest rates took a back seat in the commodities market as investors looked for ways to hedge against rising consumer prices. For the corn market specifically, high heat could be a concern.
An impending drought caused by the heat could push up prices even further.
“As you remember, 50% of U.S. corn was planted in a two-week period in May, and almost two-thirds of the corn was planted in a three-week period. So a lot of that corn went in all at once, especially in the Midwest,” said USDA meteorologist Brad Rippey in a Drovers article. “About a month from now we’re going to be looking at where that high is parked. Is it going to affect production? All of that depends on where that strong ridge of high pressure is parked in early to late July when all that corn will be moving through reproduction.”
It’s certainly a contentious situation, given that the Russia-Ukraine conflict is already putting pressure on the global food supply. Russia’s occupation of the Black Sea is keeping exports from leaving Ukraine, which provides commodities that would normally contribute to the global food supply.
“The heat is the overwhelming concern out here,” said Mark Gold of StoneX Group. “We saw that on Thursday, with prices going straight up . We’ve got along weekend coming up, so with the heat in the forecast you have two weeks of hot and dry weather in a lot of the Southern Plains and across the Midwest. Who wants to sell it here? It would take a real hard sell-off in the Dow, something around 1,000 points, in order for that to have a major effect right now.”
Adding Corn Exposure Via ETFs
Exchange traded fund investors looking to get exposure to rising corn prices as a way to hedge against inflation or add diversification to a portfolio with commodities can take a look at ETFs from Teucrium. More specifically, they can look at the Teucrium Corn Fund (CORN ).
CORN tracks three futures contracts for corn that are traded on the Chicago Board of Trade, including 35% second to expire contracts, 30% third to expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.
For more news, information, and strategy, visit the Commodities Channel.