Prospective Plantings is widely regarded as one of the most impactful USDA reports released throughout the year because it provides an early meaningful indication of the new crop year’s acreage. As such, the report is particularly powerful with respect to new crop instruments December Corn and November Soybeans. Reporting on the prior year’s harvest (the old crop) is a notable secondary function of the report. Together these indicators can affect the old-new crop spread.

In 2021 and 2022, market expectation overshot the reports’ acreage significantly, sending some Corn futures limit up on both release dates when the reports’ numbers fell short of polling. Entering the March 31, 2021 Prospective Plantings report, the market had baked in the expectation of 93^[1] million acres, overestimating the report’s 91.144 million acres by 1.856 million acres. December 2021 (new crop) Corn futures settled at limit, 25 cents above the day’s opening price, on March 31, 2021. The report marked the beginning of a price rally in corn that lasted until May.

^[1] Bloomberg PPLNCORN Index median estimate 

The next year’s estimate of 92^[1] million acres missed the mark again, with only 89.490 million acres of corn reported to be planned in the new crop year according to the March 31, 2022 Prospective Plantings. This surprise sent December 2022 Corn futures settling 27.75 cents above the day’s opening price on March 31, 2022. Like in the year prior, the report release marked the beginning of a weeks-long price rally in new crop Corn futures.

^[1] Source: Bloomberg PPLNCORN Index median estimate 

Notably, the 2022 Prospective Plantings report had a significantly greater impact on the new crop (December) Corn future than it did on the front-month (May) future. Although the report sent May 2022 Corn futures price upward, the instrument closed only 10.75 cents above the day’s open. The May-December Corn futures spread thus narrowed by 17 cents: from 82 on March 30, 2022, to 65 cents on the March 31, 2022 daily settle.

The impact of the 2022 Prospective Plantings report on December 2022 Corn futures relative to that on May 2022 Corn futures demonstrates the fundamental nature of the report as a commentary on the year’s upcoming crop. CME Group’s suite of new crop options allows market participants to pinpoint their new crop view, with a variety of tenors offered.

For the upcoming March 31, 2023 Prospective Plantings report, a Week 5 New Crop Weekly option (CN5H3) would allow precision exposure to the report because option expires that day. On the other hand, a May 2023 Short-Dated New Crop option (OCDK3) gives the user exposure to new crop Corn futures movement through April 21, 2023, allowing them to ride tailwinds from the report as seen in 2022 and 2021. A Week 2 April 2023 New Crop Weekly option (CN2J3) would serve as middle ground, expressing a view of market impact of the report between CN5H3 and OCDK3 with an expiration date of April 14, 2023. 

With the introduction of New Crop Weekly options, traders can now execute a new crop/old crop horizontal spread to expire on the day of the Prospective Plantings release. Corn Week 5 options (ZC5H3) are based on the May underlying, while New Crop Week 5 (CN5H3) have a December underlying. Both options expire March 31, 2023.   

If a market participant were to expect a situation similar to what occurred in 2022 and were thus bearish on the May-December Corn futures spread, they could express that view with an at-the-money horizontal call spread. By buying a New Crop Week 5 570^[1] call and selling a Week 5 640 call, a trader would be short the May-December spread from the delta exposure. New Crop Weekly options have been priced at a discount to standard weekly options since launch. If this continues for planting intentions, a trader could collect a premium from the transaction.

^[1] Values in this example are purely hypothetical and are presented for educational purposes. 

• December 2023 Corn futures see a greater upward price movement than May 2023 Corn futures do, thus the May-December Corn futures spread narrows and the horizontal spread will profit proportional to how much more December increases in relation to May.
• May 2023 Corn futures see a greater upward price movement than December 2023 Corn futures do, and thus the May-December Corn futures spread widens, creating a loss for the horizontal spread proportional to how much May increases in relation to December.
• May and December 2023 Corn futures both fall. If the horizontal spread is put on for a credit, the total premium is collected.
• Both May and December contracts settle unchanged on the day. If the horizontal spread is put on for a credit, the total premium is collected.

Note that the above strategy involves selling a call on the May underlying going into Prospective Plantings, which carries the possibility of May futures going limit up. Buying a New Crop (CN5H3) call spread while simultaneously selling a Week 5 (ZC5H3) call spread would help define downside risk, controlling exposure.  

The USDA Prospective Plantings report has the potential to move markets. Because the report provides a first look into minds of America’s farmers with respect to the upcoming crop year, its release is particularly impactful on new crop instruments. CME Group’s suite of new crop options allows market participants to express a nuanced view, whether they want exposure only up until the number, or hope to participate in later movements as well. A horizontal spread allows the user to express a view on the old crop/new crop relationship based on the direct impact of the Prospective Plantings report. To learn more, visit CME Group’s Agricultural Short-Term options landing page.