Corn futures rallied in early April after President Trump’s new tariffs, driven by front-loaded U.S. exports, a weaker dollar, and a tighter domestic supply.
But by mid-April, prices fell as favourable planting conditions in the U.S., easing supply fears in South America, and escalating trade tensions between the U.S. and China.
As of May 4, 40% of the U.S. corn crop was planted, far above the levels from last year (35%) and above the five-year average of 39%. The sharp jump in plantings between 27/April and 4/May has introduced a bearish backdrop with abundant supply.
Higher crop estimates from Brazil and Argentina added pressure, while slowing export sales signalled that much demand had already been met.
TECHNICAL ANALYSIS
Corn futures flashed a bearish death cross on May 1, as the 9-day moving average (MA) crossed below the 21-day MA. Since then, prices have continued their decline at a rapid pace.
The MACD is turning more negative, and the RSI is nearing oversold territory while staying below its 14-day average, signalling mounting bearish pressure and the potential for further near-term downside.
COMMITMENT OF TRADERS AND OPTIONS DATA
For the week ending April 29, Managed Money sharply increased short positions by 17.1% and trimmed long positions by 5.5%, resulting in a 36.8% drop in net longs. The shift signals growing bearish sentiment and reduced confidence in the near-term price outlook.
Despite the April 2 tariffs, implied volatility stayed muted until mid-April, then rose as prices fell. Skew briefly turned negative on April 8. It has since rebounded to its highest-level YTD, even as prices hit new lows, suggesting that traders remain cautious of further price decline.
Source: CME CVOL
Past week open interest trends are intriguing. While call OI on the OZCM5 contract (23/May expiry) increased, call OI contracted on the OZCN5 contract (20/June expiry) suggesting near-term hedging on price rebound risks with continued build-up of longer-term bearish positions.
Source: CME CVOL
HYPOTHETICAL TRADE SETUP
Given the bleak fundamentals and bearish technical signals, corn prices may see further downside. While a brief, modest technical rebound is possible, it is likely to be short-lived as the underlying fundamentals remain weak, with few catalysts for a meaningful reversal.
To express views on these trends, portfolio managers can use CME Micro Corn Futures to short the near-term July contract (MZCN2025), which expires on June 20. A hypothetical trade setup offering a reward-to-risk ratio of 1.8x is outlined below:
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme.
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
But by mid-April, prices fell as favourable planting conditions in the U.S., easing supply fears in South America, and escalating trade tensions between the U.S. and China.
As of May 4, 40% of the U.S. corn crop was planted, far above the levels from last year (35%) and above the five-year average of 39%. The sharp jump in plantings between 27/April and 4/May has introduced a bearish backdrop with abundant supply.
Higher crop estimates from Brazil and Argentina added pressure, while slowing export sales signalled that much demand had already been met.
TECHNICAL ANALYSIS
Corn futures flashed a bearish death cross on May 1, as the 9-day moving average (MA) crossed below the 21-day MA. Since then, prices have continued their decline at a rapid pace.
The MACD is turning more negative, and the RSI is nearing oversold territory while staying below its 14-day average, signalling mounting bearish pressure and the potential for further near-term downside.
COMMITMENT OF TRADERS AND OPTIONS DATA
For the week ending April 29, Managed Money sharply increased short positions by 17.1% and trimmed long positions by 5.5%, resulting in a 36.8% drop in net longs. The shift signals growing bearish sentiment and reduced confidence in the near-term price outlook.
Despite the April 2 tariffs, implied volatility stayed muted until mid-April, then rose as prices fell. Skew briefly turned negative on April 8. It has since rebounded to its highest-level YTD, even as prices hit new lows, suggesting that traders remain cautious of further price decline.
Source: CME CVOL
Past week open interest trends are intriguing. While call OI on the OZCM5 contract (23/May expiry) increased, call OI contracted on the OZCN5 contract (20/June expiry) suggesting near-term hedging on price rebound risks with continued build-up of longer-term bearish positions.
Source: CME CVOL
HYPOTHETICAL TRADE SETUP
Given the bleak fundamentals and bearish technical signals, corn prices may see further downside. While a brief, modest technical rebound is possible, it is likely to be short-lived as the underlying fundamentals remain weak, with few catalysts for a meaningful reversal.
To express views on these trends, portfolio managers can use CME Micro Corn Futures to short the near-term July contract (MZCN2025), which expires on June 20. A hypothetical trade setup offering a reward-to-risk ratio of 1.8x is outlined below:
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme.
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
Full Disclaimer - linktr.ee/mintfinance
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Full Disclaimer - linktr.ee/mintfinance
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.