The Corn Contango Collapse
Chart 1: is a one-month graph of the Dec’26 and Dec’27 corn spread.
After peaking at a $.03 contango on May 19th, the spread has deteriorated sharply, trading at a $.28 contango.
Chart 1; Dec’26/Dec’27 Corn Spread
The timing of the deterioration of the spread is an example of the dynamic forces that have interacted to determine its orientation.
Spread strategies limited to seasonality suggest that new crop spreads will not orient towards a contango relationship until supplies and a short’s ability to deliver are determined.
Given that the corn crop “is made in July,” the significant contango orientation was affected by another market factor.
Chart 2 is a graph of the July’26 corn futures over the past month.
The chart shows the July contract peaking on May 5th at $4.87 and declining to $4.33 at present.
Given that it is documented that commodity funds have liquidated long corn positions during the change to the spread, it becomes clear that open interest composition has influenced the orientation of the Dec’26/Dec’27 spread.
Chart 2: July’26 Corn Futures
The above analysis supports an analysis of commodity spreads based on institutional influences and market forces.
Happy Trading
Brent
We enjoy discussing the markets.
Reach out to me with any questions:
Trent Klarenbach
306-463-8607
Up-to-date grain prices, market trends, and expert insights to help prairie producers make confident marketing decisions.
Up-to-date special crop prices, market trends, and expert insights to help prairie producers make confident marketing decisions.
The Trent Klarenbach Podcast on YouTube, YouTube Music, Spotify, Apple
Check out our YouTube Channel:
Nothing written, expressed, or implied here should be considered investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own due diligence.