Corn Futures Contract
The CME (Chicago Mercantile Exchange) Corn futures contract, reflects the nearby number #2 yellow corn price delivered to regulated CME warehouses throughout the United States. Corn is physically delivered in a number location throughout the mid-west of the United States. This means that if you are selling corn, you are required to deliver it to a regulated ware house following the settlement date. You can find the delivery points which are listed on the Chicago Mercantile Exchange’s web site. The grade that can be used has several differentials, which trade as a discount of flat to the benchmark. CME corn is the benchmark corn price in the United States, and is generally viewed as the benchmark for grain prices.
Overview
The Chicago Mercantile Exchange Corn futures contract trades in cents per bushel and there are 5,000 bushels, which is equivalent to 127 metric tons, for each Globex CME futures contract. The minimum price increment is ¼ of a $0.01 which equates to $12.50 per contract. The contract trades Sunday – Friday, 7:00 p.m. – 7:45 a.m. CT and Monday – Friday, 8:30 a.m. – 1:20 p.m. CT. CME staff determine the settlement of the futures contract daily.
There are several grades of corn that can be delivered on settlement of the contract.
Through December 2018:
- #2 Yellow at contract Price
- #1 Yellow at a 1.5 cent/bushel premium
- #3 Yellow at a 1.5 cent/bushel discount.
As of March 2019:
- #2 Yellow at contract Price
- #1 Yellow at a 1.5 cent/bushel premium
- #3 Yellow at a discount between 2 and 4 cents/bushel depending on broken corn and foreign material and damage grade factors.
Trading is terminated for the prompt futures contract on the 15th of the deliver month. The futures contract is traded in for deliver in, March (H), May (K), July (N), September (U) & December (Z) Liquidity which is reflected by the open interest in the contracts available is approximately 1-year. This means that you will be able to get in and out of your positions without substantial slippage in trades of one year or less.
How to Trade
The corn that is traded on the Chicago Mercantile Exchange is number #2 yellow corn, which is the most widely traded conventional corn transacted in the United States. It differs from Non-gmo corn, which trades at a premium to conventional corn based on location. Number 2 yellow corn also trades at a discount to organic corn.
Corn is used for food, feed and ethanol. Most of the corn that is consumed in the United States is feed corn, that is used for farm animals. Corn is also used to generate ethanol which is a feedstock in the gasoline refining process.
The corn futures contract is used for speculation as well as, hedging purposes. Initially corn futures contracts where created to generate price security for farmers. Commercial organization could lock in future prices, and security these forward contracts with their crops.
Corn prices are subject to substantial volatility surrounding the World Agricultural Supply and Demand Estimate put out by the United State Department of Agriculture once a month. During the harvest season in the United States which comes during the early fall, this report can generate significant moves to the price of the CME corn contract.
The CME corn contract is also held by many investment vehicles such as the Teucrium Corn ETF (CORN). This exchange traded fund (ETF) hold CME corn contracts and is geared to track the price of corn. Many retail investors will use this ETF to trade CME corn as opposed to open a futures account.
Traders should also be aware of the weather which can affect the yield and quality of corn crops the same as wheat and soybeans.
