Last week, Chinese corn futures on the Dalian Commodity Exchange settled at 2,354 RMB/MT for the November 2020 contract, which is equivalent to US$8.74 per bushel. In the U.S., corn futures settled at $3.69 per bushel for the December 2020 contract. Chinese corn futures are now $5.05 per bushel more expensive than U.S. corn futures. Back on October 8, 2019 the spread between Chinese-U.S. corn futures was only $2.48 per bushel.
On October 8, 2019, Chinese corn futures were $6.54 per bushel vs. U.S. corn futures of $4.06 per bushel. Since then, Chinese corn futures have gained by $2.20 or 33.64% vs. U.S. corn futures declining by $0.37 or 9.11%.
This has caused the spread to more than double in 11 months. Historically, the long-term median spread between Chinese-U.S. corn futures since 2004 has been $2.59 per bushel. We expect it to return to the long-term median in the near-future.
With the December 2020 gold futures contract finishing last week at a settlement price of $1,947.90 per oz, corn's real money price in the U.S. is currently 0.001894 oz of gold. When NIA first suggested the Teucrium Corn Fund ETV (CORN) January $13 call option on August 25, 2020 at $0.70, corn's real money price in the U.S. was 0.001764 oz of gold. So far, corn has increased by 7.37% priced in gold, but remains well below the trailing 3-year average of 0.002645 oz of gold. For corn to return to a real money price of 0.002645 oz of gold, corn must rise by 39.57% to $5.15 per bushel.
If corn in the U.S. rises by $1.46 or 39.57% to $5.15 per bushel, look for corn in China to decline by $1 or 11.44% to $7.74 per bushel, which would cause the spread between Chinese-U.S. corn futures to return to the long-term median of $2.59 per bushel.
Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This message is not a solicitation or recommendation to buy, sell, or hold securities. NIA's President has purchased 737 CORN January 2021 $13 call options and may either buy more contracts or sell his contracts owned at any time. This message is meant for informational and educational purposes only and does not provide investment advice.