Corn futures (ZC) at CME Group, create the opportunity to profit from or hedge against the price movements of the world’s most widely grown crop.
Global corn producers currently produce more than 525 million metric tons each year, with the U.S. growing the majority and the world’s leading corn exporter by far. Most corn is planted in April and May in the area stretching from Minnesota to Missouri and from Nebraska to Ohio.
After the harvest in October and November, the domestic corn crop is split in half by its intended use; half of the crop is used to feed livestock, while food and industrial use absorb the other half.
The Contract
Each Corn futures contract represents 5,000 bushels of corn, with a minimum price fluctuation of ¼ of one cent per bushel, or $12.50 per contract. The contract trades Sunday-Friday from 7 p.m. to 7:45 a.m. Central Time (CT) and Monday-Friday from 8:30 a.m. to 1:20 p.m. CT.
Trading the Markets
All market participants trading ZC monitor reports from the U.S. Department of Agriculture, or USDA. The yearly highlight is the March issuance of the USDA’s Prospective Plantings Report, which details the quantity and type of crop U.S. farmers intend to plant.
Investors supplement this data with information from the quarterly Grain Stocks Report and the monthly Crop Production Report. Since the U.S. is the largest corn exporter, traders also consult the weekly export report for information about global demand.
These statistics are paired with historical data and weather projections to plan a trading strategy.
Supply and Demand
Like most agricultural products, the corn trade is generally seasonal. Prices typically hit a low during the November harvest since the trade is subdued throughout the winter.
The summer corn trade can be very volatile due to corn’s unique sensitivity to the weather: unfavorably hot, dry weather in July can drastically interfere with pollination and send harvest yields plunging. This weather uncertainty keeps traders on edge and prices typically hit their highs between late June and August.
On the demand side of the trade, corn’s ethanol use binds the price of ZC to the price of WTI and makes it fluctuate according to government ethanol mandates.
Similarly, demand for U.S. corn exports are inversely correlated with the U.S. dollar: a higher USD makes corn more expensive for global buyers and reduces demand for U.S. corn.
