What is Corn?
Corn, also commonly referred to as 'Maize' is a large grain plant domesticated by indigenous people of modern day South America and has been harvested for thousands of years. The leafy stalk produces ears which contain the grain know as 'kernel'. Corn or maize kernels are often used in cooking as a starch.
The six major types of corn (maize) are:
Uses of Corn
Humans are the largest consumers of corn. Corn is the mainstay of many cultures in the world after being introduced originally to Africa by Portuguese traders around the 16th.
Cornmeal (ground dried corn) can also used as a replacement for wheat flour to make cornbread and other baked products.
Corn is a major source of starch, and as such corn-starch (corn flour) is a common ingredient in home cooking, as well as in many mass produced food products. Corn is also a source of cooking oil and corn gluten.
Other examples of the importance of maize starch within commonly recognised consumer products is hydrolysed and enzymatically treated to produce syrups, particularly high fructose corn syrup, which is also used a sweetener used in many modern fast foods and household brand name products like cereals. The syrup produced can also be fermented and distilled to produce grain alcohol – traditionally the source of bourbon whiskey. Corn can also be used in the brewing process as the starch source for beer.
Risks of Corn
Like any futures contract, there is always the possibility that the underlying asset i.e. Corn will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of corn to rise), if this were to happen and the corn fell in price, your long position in corn will decrease in value.
All crops are very dependent and vulnerable to the weather. In the case of corn it is important to anticipate the summer months to be the most active and volatile for trading corn futures. Excessive heat and flooding are important weather events to interpret for price movement with corn.
Monthly crop reports can cause market movement, as the analysis of supply and demand for grains will create speculation and timing of your trading relative to such news is critical.
The size of the eventual crop will be a big influencing factor of price. This is determined by how close to the beginning of the season the crop is planted, again this is subject to the seasonal conditions. If it is planted late season, the corn crop may be smaller that year and the price could move higher due to the expectation of supply.