Corn commodities are crucial to global food and energy production. Their liquidity and volatility in particular make them a prime choice for commodities traders.
Tradu gives you clear charting, up-to-the-minute pricing, and a host of knowledge and insights designed to improve your ability to successfully trade the corn markets. Start trading corn commodities today.
Corn commodity trading is the process of buying and selling corn for profit. Corn is the third-largest plant-based food source in the world and is also used in the production of additives like high-fructose corn syrup, although this is a relatively minor use of the crop. It is used in much greater quantities in the production of ethanol (used as an additive in petrol), for livestock feed, in plastics, and as a source of starch. Let's take the US, the world's top corn producer. According to the World Economic Forum, in 2020, 38.7% of US corn was used as feed, 34% as ethanol, 17.5% was exported abroad, and the 9.8% remaining used for foodstuffs like sweeteners, starch, cereal, and seeds.
Corn commodities are traded on exchanges including the Chicago Mercantile Exchange (CME), Tokyo Grain Exchange (TGE), and NYSE Euronext (Euronext). The CME is the most common, on which traders can buy two listings:
According to the United States Department of Agriculture's Foreign Agriculture Service, in 2023, world corn production amounted to 1.223 billion metric tonnes. The top producers were (plus production levels in million metric tonnes, and percentage of world production:
The trading hours for both CMC Full-Sized Corn (ZC) and CME Mini Corn (XC) are:
Understanding trading hours and how the price of corn commodities changes throughout the day can mean the difference between trading success and failure. Strategy is key – create a solid one via our guide below. Create a commodity trading strategy.
Corn is classed as a soft commodity given that it is an asset which is grown, like wheat, coffee, sugar, and cocoa.
Hard commodities, on the other hand, are extracted from the Earth. These include copper, oil, silver, and gold.
The price of corn commodities can be volatile due to a host of factors. Having a strong understanding of these factors can help you time, execute, and close trades with greater confidence and precision.
While corn is grown on a global scale, if harvests are poor in one region and others fail to match production levels, then prices increase. If harvests are bountiful, prices can decrease.
The transport and storage of corn can also factor. The supply shocks due to the Russo-Ukrainian War and the faltering grain deal brokered between the two nations led to significant volatility in the corn commodity price.
Corn prices can increase if demand is high and reduce if demand falls.
If governments choose to add ethanol to petroleum or boost energy production via biofuels, ethanol demand can increase, increasing the price of corn. If growth is strong (particularly in emerging markets) and leads to higher incomes and wealth, or population increases, demand for food, and the price of corn, can grow in kind.
Since corn is farmed, healthy growth and high production are reliant on the crop receiving the right amount of rain, sunlight, and heat. The optimum windows for each of these growing factors are surprisingly narrow – highest yields are produced between 20-22˚C with 45-50cm of rain per season.
Climate change will have a significant impact on global temperatures and weather patterns. Research from Stanford University and Pennsylvania State University has found that increased temperatures, humidity, and radiation could reduce corn commodity yields by up to 15% over the next half-century.
Increased temperatures may result in more land being opened for corn growing in upper and lower latitudes, however, which may offset production losses due to extreme weather.
Corn is typically priced in US dollars. As such, if the dollar is strong, the price of corn will fall, and vice versa. Dollar strength can be affected by a range of factors, including US interest rates, economic performance, and events like pandemics and conflicts.
Corn prices typically rise between April and October, before reducing over the winter period. Prices rise during this time as it is the growing season and the volume of stored corn is slowly reduced, coming more valuable.
Since corn is a globally valuable commodity, it is constantly transported by road, rail, and sea. Shipping costs can therefore have an impact on the price of corn.
When trading corn commodities, there are multiple options open to you. These include:
Contracts for difference (CFDs) are contracts between provider and trader that allow the latter to speculate on future corn commodity prices. Traders choose to short corn if they think prices will decrease or go long if they think they will increase. If the price follows the prediction by the time the CFD expires, the trader profits in line with the price of the corn security the CFD is based on. If it doesn't, the trader makes a loss paid to the provider based on the price movement.
If wish to trade over the mid to long-term and only want to go long on your trades, corn stocks and ETFs could be an option.
These are securities which track stocks of businesses that deal in or are heavily impacted by corn commodities. When investing in them, you purchase with the expectation they will increase in value over the trading period. These companies include the likes of Archer-Daniels-Midland Company (NYSE: ADM), Bunge (NYSE: BG), Ingredion Incorporated (NYSE: INGR), and Green Plains Renewable Energy (NASDAQ: GPRE). Exchange-traded funds (ETFs) are another option – they comprise several corn-based stocks, potentially providing slightly increased diversification and a simpler way to trade corn commodities.
Before you start trading any asset or security, it can pay to understand the benefits and drawbacks. The key advantages and drawbacks of corn commodities are listed below: