Grains Markets Rally... Again.

By Craig Bewick
APR 26 2021

US Equity Index prices were little changed to start a week during which some of the world’s largest companies will report earnings results and the FOMC will conclude it’s April meeting on Wednesday.  CME Group’s FedWatch tool, which attempts to assign a probability of an FOMC interest rate move at each meeting based on Fed Funds futures prices, is assigning a near zero percent chance of an interest rate hike on Wednesday but has risen to a slightly over 10% chance at the June meeting.  As has been the case lately, Fed Chairman Powell’s accompanying statement could have market-moving potential.  Despite the steady to positive price action in US equities today, implied volatility in the options markets ticked up slightly. 

Even though we don’t want to continue to sound like a “broken record” the move in CME Group grains markets today warrants conversation.   The price of Corn, Wheat and Soybean prices rallied by about 4%, 3.5% and nearly 2%, respectively as all three grains continued to make new multi-year high levels.  In the agriculture industry, one measure of supply/demand that experts watch is called “stocks to use” ratio which are near all-time lows.  As we’ve mentioned here recently, the market will be closely watching the WASDE (supply/demand) report scheduled for May 12th.  Perhaps not surprisingly, with the price rally, we’ve also seen a significant move higher in implied volatility in the grains options markets as you can see in the QuikStrike graphs below.  This makes intuitive sense given the market-moving potential that the WASDE report scheduled for May 12th holds. 

ABOUT THE AUTHOR

Craig Bewick has spent 25 years in futures and options markets, starting at CBOT and CME working in risk management, regulatory, technology, product management and client development. 

Connect with Craig at activetrader@cmegroup.com

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