Corn Trading

Corn trading is one of the largest agricultural markets, largely because it is the most widely grown crop in the United States. Traders in the UK, the Philippines, the US, India or anywhere around the world are already profiting from corn price movements. Read this 2022 corn trading guide to learn everything there is to know about corn speculation and futures, including its history, price influences, market trading hours & months and more. We have also compiled a list of the top brokers for corn trading below.

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What Is Corn Trading?

Corn is not usually one of the first assets that traders add to their portfolios. When investors look at commodities trading, they tend to gravitate towards products like oil, silver and gold. Rice and corn trading, as well as other agricultural commodities, are regularly overlooked. They should not be.

Corn is the most widely produced crop in the United States, with over 13 billion bushels of corn harvested each year. The US produces everything from candy corn to sweet corn, with all sorts in between, and many corn trading companies have sprung up in the US alone. These include Sweet Corn General Trading LLC, Corn Maiden Trading Post, Corn Shop Trading Co. (Bridgton, Me) and Red Corn Trading Limited. The corn produced by these companies is used for a range of purposes, such as livestock feed, ethanol production and general use.

Corn trading is a practice used by investors and traders that aim to make money off the price movements of the asset. Corn, like any commodity or financial instrument, experiences fluctuations in price due to many different factors. Investors often trade corn futures, either aiming to profit from price increases or hedge against drops in value.

Corn futures trading occurs on the Chicago Board of Trade (CBOT), now part of the Chicago Mercantile Exchange (CME), the NYSE Euronext (Euronext) and Tokyo Grain Exchange (TGE), as well as many other exchanges around the world. Trading times and months vary between the different exchanges, as does the method of trading. The traditional trading pit is currently being phased out in most cases and is being replaced by live remote trading. Corn futures trading is not the only way to get into the industry. Options trading, mini corn futures and stock trading are just a few other ways that the commodity can be traded. Each has different trading strategies and limits associated with it, all of which will be covered later.Corn trading guide with strategies and top tips

History Of Trading Corn

Corn has been a staple of everyday life for centuries, having been used as a source of food, energy and monetary value. Corn has been traded in the US and the UK since the early nineteenth century. Agricultural producers were subject to drastic seasonal and supply fluctuations, as well as repeated gluts and shortages, all causing drastic price fluctuations. Moreover, storage facilities were basic, markets were disorganised and production was unpredictable. This climate saw the rise of agricultural commerce hubs in New York and other cities near navigable waterways, enabling a central, stable market for producers and consumers alike.

By 1848, Chicago, largely due to its proximity to the Great lakes and its links with the Mississippi River, had become a key agricultural hub. The Chicago Board of Trade (CBOT) was formed and would go on to become the primary grain exchange in the United States. Establishing this central grain exchange for corn trading allowed farmers to sell their crops at set prices throughout the months between harvests and gave consumers access to transparent prices throughout the year.

Initially, all trading was conducted using forward contracts. However, in 1865, the CBOT introduced standardized futures. These were centrally cleared contracts, secured with the payment of performance bond or margin payments by clearing members. They introduced further security and reliability for buyers and sellers and stabilized the markets against the possibility of default. Since this, further innovations in futures contracts have been introduced and other exchanges have followed in the footsteps of the CBOT (now Chicago Mercantile Exchange or CME). Today, corn futures are traded electronically, removing the need for the trading pit.

Today’s Corn Trading Value

What Influences The Price Of Corn?

Many different factors affect the price of corn and its related trading economics. This section will run through some of the main factors that cause fluctuations in corn’s value.

Chinese Demand

One of the main factors driving the price of corn and the market right now is an increase in Chinese demand for international grain feeds. China has a rapidly evolving economy and community with changes in dietary habits that are leading to an increase in the livestock being reared. This has created a demand for corn and other livestock grain feeds. As a result, Chinese annual corn demand has more than doubled in the past decade, leading to an increase in imports, 40% of which come from the United States. This increased demand has driven corn trading prices up. However, if forecasts are correct and China is headed for a bumper crop season, the country would not need so much corn, reducing the asset’s value.

Brazilian Crop Deterioration

Brazil is the third-largest producer of corn, after the US and China. Most of the corn produced in the country is consumed domestically. However, in 2021, the Brazilian corn crop deteriorated. The market was shattered as cold waves swept in throughout the year. These caused large amounts of frost, which lowered crop output. The USDA estimates went from 102 million metric tons (MMT) at the start of the year to 98.5 MMT later down the line and Agrural’s estimates similarly fell. This drove the price of corn up as Brazil looked to imports to fill the gap in its production lines.

Supply & Demand

The most important factor with regards to the price of corn in a particular year relates to the total supply available for consumption in each country. A small supply results in a high price and a large supply results in a relatively low price. Furthermore, if the supply outweighs the demand in a particular year, it impacts corn prices in the next year. Old corn stock is used, which increases supply and further decreases the price. In the same vein, if supply is large but demand also increases to match this, there will be less of an impact on the overall price of corn.

Oat & Barley Production

This is particularly relevant to US corn trading markets and prices. Oats and barley are important crops in corn-growing states. They are both used in place of or to supplement corn in livestock feeding operations. An increase in the production of oats and barley has a similar impact to an increase in the supply of corn itself. The increase reduces the demand and, therefore, tends to reduce the price of corn. It has been estimated that a 20% increase in the production of oats and barley has the same effect on the price as a 1% increase in the supply of corn.

Livestock On Farms

According to 2019 reports, about 35% of corn production in the US was used as livestock feed for cattle, poultry, hogs, dairy cows and other animals. As such, the number of livestock animals on farms has an impact on the price of corn. If the number of animals on farms increases, the demand for corn to feed them also increases. This can cause the price to increase. Similarly, if in a certain year the number of livestock were to decrease in a country, the demand would decrease, and the price of corn would likely go down. This is particularly important in countries where there are large livestock and agricultural industries like the United States and Brazil.

Distribution Of Production

This factor affects the price of corn at specific markets, for example, we can look at the Chicago Mercantile Exchange (CME). The price of corn in Chicago is not only influenced by the total supply but also its distribution. When the proportion of corn supply is greater in the area surrounding the Chicago market, Chicago corn prices will be lower. Similarly, if the supply is spread out and less is reaching the Chicago market, the price there will be higher.

Quality Of Corn Crop

The quality of the crop is an indication of the proportion of corn that will be of better grades. Price is generally given for a specific grade, so the price is influenced by the supply of said grade as well as the total supply of corn. If the crop is of higher quality, the price of that higher-quality corn will be lower than it would have been if the overall quality was lower. It has been estimated that a 5% increase in general quality has the same effect as a 1.5% increase in total supply.

USD Value

The value of the dollar influences the prices of all commodities because it is the benchmark pricing mechanism for most assets. The US dollar is the most stable currency and many nations tend to hold dollars as reserve assets. For the international trade of raw materials, like corn trading, the dollar is the exchange mechanism used. If the value of the dollar drops, it will cost less of the buyer’s currency to buy corn. Similarly, when the dollar strengthens, it costs more. If the trader already holds dollars in reserves and the value strengthens, they benefit from effective cheaper prices.

How To Trade Corn

When investors are looking to trade corn, there are a variety of instruments at their disposal. Here, we will look at some of those available and explain the benefits:

  • Spot: Spot trading is one way for investors to speculate on the value of corn. Spot trading refers to the purchase of a commodity like corn for instant delivery on a specified date. If you wish to purchase corn and sell it on, this instrument could work for you. However, if you just want to speculate on price movement, you may be better off looking elsewhere.
  • Futures: A commodity futures contract is an agreement to buy or sell an asset like corn at a future date. The price and amount of corn are fixed at the time of the agreement. Most contracts stipulate that the agreement will be fulfilled by the delivery of the commodity, so if you are looking to speculate on price movement, you should look for ones that allow cash settlements. It is possible to sell the contract on at a later date before having to accept delivery of the product or receive a cash settlement as is commonly agreed.
  • Options: Options contracts are like futures contracts in that the price and amount are fixed during the agreement. However, unlike futures, you are not obliged to purchase the corn, you can turn the offer down if you wish. In other words, you have the option to purchase an amount of corn at a set price on a set date.
  • Spread: A spread involves the simultaneous purchase of corn and sale of corn. If you lock into an options contract and the price increases, you can purchase the corn and sell it instantly for profit, without having to accept delivery.
  • Corn Stock: It is possible to purchase corn related stock instruments. Stocks such as Teucrium Corn Fund reflect daily changes of corn price in their value. This allows investors to purchase stocks and benefit from long or short term increases in price. This is suitable for those that do not want to accept the delivery of corn and be tasked with selling it or the contract on.
  • CFDs: CFDs are a derivative product that allows traders to speculate on the price movements of corn without taking ownership of the underlying asset. Traders can profit from the price either moving up or down within a given time frame. This instrument is perfect for those that simply want to predict which way the price of corn will move. If you want to buy and sell physical corn, this is not for you.
  • ETFs: A corn trading ETF is an exchange-traded fund invested in a physical commodity. It tracks the price and performance of the commodity or commodities it accounts for. ETFs are a great instrument for those that do not want to take delivery of bushels of corn.

CBOT corn last trading day and overnight trading

Pros Of Trading Corn

  • Range of instruments to suit needs
  • Allows for portfolio diversification
  • Large price fluctuations
  • Worldwide market
  • Large liquidity

Cons Of Trading Corn

  • Unpredictable weather can affect price movements
  • Small margins

Corn Trading Strategies

So, you want to get into the corn trading business. However, corn is not a mainstream commodity and it can be difficult to find effective trading strategies. Here, we will cover some basic ones that you can apply to all corn instruments, whether you want a futures trading strategy or wish to apply it to CFDs.

Seasonality/Corn Plantation

Like many commodities, seasonality plays a big role in corn’s price fluctuations. Many traders use seasonality patterns in the same trades year after year. Check charts to see when, during the year, the price tends to rise and fall. For example, the price of corn tends to rise from April through to October and then it begins to fall back down.

Corn-Soybean Spread

Corn is grown in rotation with other crops, particularly soybeans. The corn-soybean ratio is not only important for farmers but also traders. Farmers use this to make plantation decisions and speculators can use it to predict the price movements of corn. If the ratio falls below 2.2:1, corn prices are generally expensive and will tend to fall off. Similarly, if the ratio climbs above 2.4:1, corn is historically cheaper and the price can be expected to rise.

How To Start Corn Trading

Follow this quick step-by-step guide to get going with corn trading:

  1. Choose A Broker: The first step is to choose a broker that offers corn instruments. Some things to consider are the fees charged by each broker, customer support levels and the range of corn instruments offered. For a full guide to comparing brokers, see here.
  2. Open & Fund An Account: Once you have chosen a broker, open an account with them and fund it.
  3. Open A Position: The next step is to open a position. Research the market, predict which way you think the price of corn will move and take a position that you are comfortable with.
  4. Monitor & Close: Monitor your open position, checking the market regularly. When it is favourable and suits you, close your position and take your profit, or accept your loss and stop it from worsening.

Corn Trading Tips

Stay Up To Date

One of the best things you can do while trading corn is to stay up-to-date and read the news. This will give you live updates on the agricultural market, which could help you predict which way the price will move. Additionally, it could warn of an upcoming situation in which corn trading may be halted.

Check The Data

While trading corn futures, or any asset, it is important to always check the data. There are many charts and figures available with sites and platforms like TradingView that will help you to understand the current market and its trends. These will ensure you can make well-informed predictions of which way the price of corn will move.

Final Word On Corn Trading

Corn trading provides an opportunity for potentially profitable investments in the global or local agricultural markets. Corn is not a mainstream commodity, yet it is a great way for traders to diversify their portfolios. Whether you want to trade futures, options, spreads or spots, you will be able to find the right instrument and strategy for you. Corn will likely continue to be one of the most widely produced and exported crops around, so, if you want to start profiting off the corn markets today, follow our step-by-step guide.

FAQ

What Is Corn Trading At Today?

The price of corn fluctuates regularly. To find the current corn price, check out our chart above, look at broker price feeds or visit websites like Trading Economics.

What Are The CME Corn Trading Hours?

On the CME, corn futures trade on weekdays from 19:00 to 07:45 and 08:30 to 13:20 GMT – 6. Corn options trade at the same time.

What Is The Corn Trading Symbol?

When corn trading on the Chicago Mercantile Exchange, the commodity is represented by the symbol C or ZC.

What Is The Last Trading Day For Corn Futures At CBOT/CME?

The last trading day for corn assets refers to the final day of a futures contract or any derivative with an expiry date. On this date, the trade will be closed out before delivery of the corn or cash settlement must occur.

Where Can I Trade Corn?

There are three main markets for corn trading. The Chicago Mercantile Exchange (CME), NYSE Euronext (Euronext) and Tokyo Grain Exchange (TGE). However, most retail and professional corn traders do their speculation through brokers that link data from these exchanges to dedication platforms.