by Daniels Trading|
Agriculture futures offer market participants a vast array of hedging and speculative possibilities. Whether you’re trading Chicago Mercantile Exchange (CME) soybean, wheat, or live cattle futures, there’s always a deep, volatile market at your disposal.
Some of the best opportunities for ag traders are in the corn futures market. Read on to quickly get up to speed on the ins and outs of trading maize derivatives.
CME Corn Futures
When it comes to trading corn derivatives, the CME’s lineup of products leads the pack. Offered by a CME subsidiary, the Chicago Board of Trade (CBOT), two corn listings are featured: full-sized and mini corn futures.
CME Full-Sized Corn (ZC)
Full-sized CME corn (ZC) is one of the most popular grain and oilseed contracts in the world. For 2021, the ZC contract posted an average daily volume (ADV) upward of 350,000 and a peak open interest (OI) in the neighborhood of 1.7 million. Given these robust stats, full-sized corn is an exceedingly liquid market.
Here are the full-sized corn contract specifications:
| Symbol | ZC |
| Market | CME Globex |
| Size | 5,000 Bushels |
| Minimum Tick | ¼ of one cent ($0.0025) |
| Tick Value | $12.50 per tick |
| Listings | Nine monthly contracts of March, May, and September. Eight monthly contracts of July and December are listed annually after termination of the current year December contract. |
| Settlement | Physical Delivery |
| Trading Hours | Sunday-Friday 8 p.m. to 8:45 a.m. EST. Monday-Friday 9:30 a.m. to 2:45 p.m. EST. |
Note: A trading at settlement (TAS) contract is available for full-sized corn futures under the symbol ZCT.
CME Mini Corn (XC)
For traders looking for a way to secure reduced corn market exposure, the CME offers the mini corn contract. At one-fifth the size of full-sized corn, mini corn futures provide the retail sector with enhanced granularity and a vastly reduced risk profile.
Here are the contract specs for CME mini corn:
| Symbol | XC |
| Market | CME Globex |
| Size | 1,000 Bushels |
| Minimum Tick | ⅛ of one cent ($0.0025) |
| Tick Value | $1.25 per tick |
| Listings | Nine monthly contracts of March, May, and September. Eight monthly contracts of July and December are listed annually after termination of the current-year December contract. |
| Settlement | Physical Delivery |
| Trading Hours | Sunday-Friday 8 p.m. to 8:45 a.m. EST. Monday-Friday 9:30 a.m. to 2:45 p.m. EST. |
Corn Market Drivers
Like all other commodities, corn futures feature a collection of unique underpinnings. In fact, most corn traders and producers scrutinize the two following market drivers when seeking their financial objectives.
Supply & Demand
The U.S. is the world’s largest corn producer, exporting 10-20 percent of its annual output. More than 90 million acres are planted with corn in the U.S., with a majority being located in the Corn Belt. This is a key element of the global supply and demand picture because corn is a leading international foodstuff, with 45.4 billion bushels forecast to have been consumed between October 2020 and September 2021.
Given a constant demand for food and energy (ethanol), corn supplies have a major impact on pricing. Thus, adverse weather events such as flooding or drought can severely reduce planted acres and output. Annual crop carryover levels can also send corn prices up or down.
Market participants frequently use corn futures to address perceived supply-demand disequilibrium. The following are the most basic forms of these strategies:
- Bullish: If corn prices are expected to rise (demand is greater than supply), market participants may decide to go long ZC. Given this scenario, traders would buy a deferred-month ZC contract in anticipation of a sustained rally in price.
- Bearish: In the event that corn prices are expected to fall (demand is less than supply), market participants may decide to short ZC. To accomplish this, traders would sell deferred-month ZC contracts in anticipation of a sustained downtrend in price.
USD Strength
Like all other commodities, corn prices exhibit sensitivity and a strong negative correlation to the USD. Generally speaking, when the USD strengthens, the price of corn falls. In contrast, when the greenback weakens, corn prices tend to rally.
From a practical standpoint, there are many reasons for a strong or weak dollar. A few of the largest are central banking policy, U.S. economic performance, or outliers such as the COVID-19 pandemic. However, no matter the state of the USD, corn futures can be used to address the dollar. Here’s how:
- Inflation hedge: During periods of USD devaluation, investors often buy corn to hedge against inflation. Accordingly, going long ZC or buying call options are viable inflationary strategies.
- Hawkish hedge: Quantitative tightening occurs when the U.S. Federal Reserve (Fed) decides to raise rates, limit access to credit, and reduce the money supply. Amid such policies, the USD is poised to gain value. In response, market participants often short commodities such as corn. To do so, one can sell ZC futures or buy ZC put options to capitalize on forthcoming bearish corn pricing.
Protect Profits with Hedging Strategies
Incorporating futures and options into your hedging strategy can help protect you from positive and negative price fluctuations in the markets. Download our Ultimate Guide to Hedging to get started.
About Daniels Trading
Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.
Risk Disclosure
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.
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