Corn Futures Volatility: A Cautionary Tale for Investors

For farmers and investors in corn futures, Labor Day marks a turning point. Since 1974, holding onto long-term corn contracts has resulted in an average loss of just one cent compared to prices on the day before the holiday. However, individual years have been far more volatile, with losses outpacing gains two to one.

While it might seem like a safe bet to hold onto corn futures, Bryce Knorr, a contributing market analyst for Farm Futures, warns that 'average isn't every time.' He notes that in some years, the price of corn has dropped significantly after Labor Day, with losses occurring twice as often as gains.

Knorr suggests that cautious optimism is more likely to yield better results than unrestrained bullishness about future rallies. Looking at historical data, he points out that both July and December corn futures lost ground 23 times the day after Labor Day, avoiding losses in only 29 of the 52 years examined.

As for the current market situation, Knorr expresses optimism about potential demand from China and other countries. He also notes that the 'super El Niño' weather event has historically not hurt production in South America, with increased yields associated with warmer equatorial Pacific temperatures.