Corn Oil Futures

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CornOil Futures

Startedby buying, because when I saw the price was decreasing, I thoughtwhat price will increase in the future, so I made the decision ofbuying. However, it did not go the way I was planning, the price whento 373’0. I decided to sell because I was afraid I was going tolose more money. I decided to trade in the corn futures as theybelieved that they are dynamic and as a speculator I could make a lotof profits. I assumed the price risks of hedgers and using riskevasive methods to avoid losses, and I can get the return on theprofit from the favorable prices of corn movements.

Thewhole plan is to purchase of corn futures when I believe will go upand selling them when I believe that they will fall in prices, thiswill enable me to build a portfolio that will earn me a lot ofprofits(Knorr, 2015).The trend of the corn features before my first transaction was thatthe prices of corn were dropping in value tree days before I did thefirst transaction the price was 382’6. Therefore, since I knew theprices will be sky rocking for a short while due to high demand andthat was the time, I would take advantage and make profits(CME group, 2015).

Thecorn futures are some of the most lucrative futures that gives thebest opportunities to most of the traders and one of the reasons whyI chose corn as the product the trade on is the fact that it willprovide greater opportunity to me(Knorr, 2015).The relationship between corn and other energy products such as oilmakes the future price trends of corn to be much more predictable andhence better chances of having profits developed in the long run(Adeyanju, 2015).

PriceFluctuation of Corn

Datawas collected between November fifth to the fourth of December hasbeen analyzed using the excel extraction bellow. The line graphdepicts the fluctuations experienced by the prices of corn features(Knorr, 2015).

Resultsanalysis

Overthe past several decade, corn has turned out to be one of the mostsustainable food for the human being and, therefore, the demand andsupply of this commodity has continuously affected the market valueand prices(Knorr, 2015).Within the United States, corn is also used in the manufacture ofcorn ethanol, this is an alcohol that has become one of the mostimperative gasoline. Corn is also considered as one of thealternative sources of energy of gasoline(CME group, 2015).

Accordingto the graph presented above, random fluctuation of the prices offutures of corn is depicted clearly. On the seventeenth of November2015, we find the day with the lowest futures prices coming as low as368’0. A reduction in the need of ethanol by users in the marketdue to a greater drop in the prices of oil hence affecting the pricesof corn. It is only 40 of the corn being produced that ends beingprocessed to ethanol and therefore hence its reliability as a sourceof energy is not sufficient.

Thedropping prices of corn features what made it convenient to starttrading was caused mainly by the low demand for the product in themarket(Adeyanju, 2015).Corn is one of the products which is transforming very fast into theenergy commodity. This shows that corn is likely to develop a pricewith a very close relationship with the energy commodities such asoil. One of the good reason is very little predictability of thedirection of the corn market. The relation of the energy commoditieswith that of the coil is positive and hence we can use the pricefluctuations of other energy products to determine and to predictfuture trend to the corn prices in the market(CME group, 2015).

Oneof the major reasons why there was a drop in the corn prices for thesecond time on the 27th of November 2015 is because of the reductionin prices of the oil prices and since their relationship is orcorrelation is absolute(Adeyanju, 2015).Although there are disparities, it is just because it is a biofueland it is still developing on a small scale.it is important to notethe relationship may be extremely huge in the future and they alwayshave very short period changes. I had to keep tabs with the oilmarkets when attempting to predict the corn prices and make betterprofits(Knorr, 2015).

Onthe period between the first and third day of December, there was anincrease by about 24% of the ethanol demand, this leads to anincrease in the prices of futures of the corn drastically from 373’6to about 381’4 this indicated that the demand for the cornincreases during the period. The followers of the energy sector haveknowledge of the fact that anything that attracts energy has a lot ofattraction to the investment community and this is what is actuallyto the corn market within the United States(CME group, 2015).

Theclimate is also one of the major factors that affect the fluctuationof the corn prices. The nature of the climatic conditions determinesthe length of time that when there id climatic changes the farmerswill develop the heat tolerant varieties of corn. It is alwaysimportant to remember the climatic conditions while predicting thecorn market. As a matter of fact, the climate is a fundamental factorin the pricing of any other agricultural commodity(Adeyanju, 2015).

Profitsand losses calculations

Thepurchasing price of the corn futures were 370’0 while the sellingprice is 370’2 the difference between the two refers to the profitmade that is ’20. The market behaved in abnormal ways, and the kindof profit that I was expecting to get was a different one. Thedifference that come in between the purchase of corn futures and theselling price determines the profits and the loss made during thebusiness transaction. According to the to the rules of the businessfor every round turn of the transaction $25 is given as additionalprice. In our transactions, we managed to make one round term hencewe shall have additional $25 from the broker. It is unfortunate thatthe profits that I made may not be sufficient enough to make me winthe price. It was a very nice experience learning how to trade infutures.

REFERENCES

Adeyanju,C. (2015, December 07). TheTop Factors That Move The Price of Corn .Retrieved from Future Knowledge :http://www.futuresknowledge.com/news-and-analysis/grains/the-top-factors-that-move-the-price-of-corn/

CMEgroup. (2015, December 07). CornFutures Quotes .Retrieved from CME group:http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/corn.html

Knorr,B. (2015, December 07). MorningMarket Review by Bryce Knorr.Retrieved from Farm Futures :http://farmfutures.com/story-morning-market-review-bryce-knorr-22-30780

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