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 in particular, high heat could be a concern.
An impending heat-induced drought could drive prices up further.
“As you remember, 50% of American corn was planted over a two-week period in May, and nearly two-thirds of the corn was planted over a three-week period. So a lot of that corn came in all at once, especially in the Midwest,” said USDA meteorologist Brad Rippey in an article by Drovers. “In about a month we’re going to be looking at where that high is. Is that going to affect production? It all depends on where that strong high pressure ridge is stationed from early to late July when all that corn will go through reproduction.
This is certainly a controversial situation, given that the Russian-Ukrainian conflict is already putting pressure on the world’s food supply. Russia’s occupation of the Black Sea prevents exports from leaving Ukraine, which supplies products that would normally contribute to the world’s food supply.
“Heat is the main concern here,” said Mark Gold of StoneX Group. “We saw that on Thursday, with prices going straight up. We have a long weekend ahead, so with the heat forecast, you have two weeks of warm, dry weather across many southern plains and across the Midwest. Who wants to sell it here? It would take a real sell-off in the Dow, something around 1,000 points, for that to have a major effect right now.
Exchange-traded fund investors looking to gain exposure to rising corn prices as a way to hedge against inflation or diversify a portfolio with commodities can take a look at Teucrium ETFs. Specifically, they can examine the Teucrium corn bottoms (CORN ).
CORN follows three corn futures contracts that are traded on the Chicago Board of Trade, with 35% of the second contracts expiring, 30% the third contracts expiring, and 35% in December following the third expiring. The various contract exposures help the fund limit the negative effects of contract rollover, especially in a contango market.
For more news, insights and strategy, visit the Commodities Channel.