Big open interest in corn

K

kxvid

Anybody got an opinion on this? Open interest in the active month is 783K contracts. Seems well above the historical normal. Trying to figure if higher demand for the contract is bullish or bearish.

I'm thinking its farmer's locking in these higher prices right before harvest & speculators obliging them. On the other hand it could be speculators eying the high wheat prices and making bets in various directions with corn. FYI: I'm new to the softs, but exp with hard commodities.

Your thoughts appreciated.
 
Quote from kxvid:
----Open interest in the active month is 783K contracts. Seems well above the historical normal.
----Trying to figure if higher demand for the contract is bullish or bearish.
----farmer's locking in these higher prices right before harvest & speculators obliging them.
----On the other hand it could be speculators eyeing the high wheat prices and making bets in various directions with corn.
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1) You would expect open interest in December to be "large" during this time of the year.
2) Aggressive buying, more so than "higher" demand, is bullish.
3) You have to consider the participation of commercial users of corn in addition to growers and speculators. They are the ones who really "move" the market.
4) Corn may benefit from the "coat tail effect" with wheat.
5) Let's see if the September crop report can put a "lid" on the market and the expected harvest decline can occur. If the market keeps rallying then, it would be indicatve of enormous underlying strength. :cool:
 
Quote from kxvid:

Open interest in the active month is 783K contracts. Seems well above the historical normal. Trying to figure if higher demand for the contract is bullish or bearish.

Large open interest in the nearby corn should not be interpreted as "higher demand" for the contract. Analysis of the composition of the open interest reveals a large long position held by funds some of which has been accumulated in the rally over the past month. Assuming that the funds will not stand for delivery, it is difficult to make a correlation between open interest and demand. As suggested above, that is not to say that the net effect to price won't be the same as end-user demand (higher prices) but it helps to clarify what is and isn't commercial support.

regards, local
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Explains the great short trade in the Sept. / Dec. calendar spread. Stevie Wonder saw that one coming.
 
Quote from kxvid:

Anybody got an opinion on this? Open interest in the active month is 783K contracts. Seems well above the historical normal. Trying to figure if higher demand for the contract is bullish or bearish.

I'm thinking its farmer's locking in these higher prices right before harvest & speculators obliging them. On the other hand it could be speculators eying the high wheat prices and making bets in various directions with corn. FYI: I'm new to the softs, but exp with hard commodities.

Your thoughts appreciated.
More...
I think a better question would be:

Why is Dec Corn making new highs right before one of the biggest corn harvests in the world? It's probably because all the end users are nice and like farmers to get a good price for their corn crop.
 
High Open interest confirms a trend higher. Hedge funds are buying into the trend, end producers a buying to protect against price increase, speculators are buyers. The only sellers you have a farmers hedging against price depreciation.
 
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