CORN: Time To Buy (NYSEARCA:CORN)

Source: Goodfon

Instrument

The Teucrium Corn ETF (CORN) provides investors unleveraged direct exposure to corn without the need for a futures account. Therefore, the decision to invest in this fund should be made after analyzing the corn market.

Seasonality

During the previous five years, the corn futures price was growing in the period from September to November. Let me remind you that September will come in a week.

Corn-Wheat-Soybean Spread

At the moment, corn is much cheaper than wheat:

The same can be said for the soy-corn spread:

The latter is especially important because now corn and soybean are highly correlated with each other:

U.S. Export

The current marketing year for corn ends in the US. And we must admit that in the context of export, it was the worst marketing year in the last five years:

But at the same time, we have to note that the outstanding sales (sold, but not shipped) for the next marketing year are already the highest in five years. This is a great start to the upcoming season.

Supply And Demand

The latest WASDE report was almost neutral for corn. But I would like to draw your attention to the dynamics of USDA forecasts.

The first USDA forecast in May assumed a surplus of 25 million tons for the global corn market in 2020/2021. Now this figure is about 6 million tons:

Specifically for the US corn market, the dynamics is similar:

As you can see, the dynamics of changes in USDA forecasts for the corn market in the current season is clearly “bullish”.

Fundamental Price

In the corn market, as a commodity market, the price is formed on the basis of the balance between supply and demand. One of the key markers of this balance is the stock-to-use ratio. Therefore, in the long run, there is the relationship between the values of the stock-to-use ratio and the average price of the corn futures.

According to the latest USDA forecast, the stock-to-use ratio for the global corn market excluding China will reach 13.9% in 2020/2021. And judging by the long-term relationship between the price of corn and its stock-to-use ratio, we can conclude that the current corn futures price is slightly below the balanced level:

If we look exclusively at the US corn market, the price is balanced:

Funds

According to the latest COT report, funds still hold the net short position on corn. But they are now the least bearish in four months:

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Bottom line

Bringing it all together, I believe that the CORN ETF could reach $13.5 per share in the coming month.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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