June 2019 Ags Update

2019 U.S. Planted Corn Acreage/Yield Dilemma

The 2019 US planting season has been one for the history books, with corn planting at the slowest pace on record due to the excessive wet weather pattern across the US. It began with an abrupt change to a wetter pattern immediately after the 2018 harvest.   This did not allow fall application of anhydrous ammonia ahead of the 2019 corn crop before winter set in, which is highly unusual.   The wet pattern persisted during the winter months and extended through May. The above chart shows precipitation as a percent of normal over the past six months. with many areas receiving 130-250% of normal precipitation from December to early June.

As a result of the heavy rains over the central US, all five of the US Great Lakes are near or above record high water levels as of early June, and the Illinois and mid and upper Mississippi River are effectively closed for the remainder of June due to high water, which is also very unusual. The following chart shows the record slow US corn planting pace and the second slowest US soybean planting pace.

The acreage and yield results for the U.S. 2019 corn crop are big unknowns right now. Trade estimates suggest acreage will fall by 4-10 million from the Prospective Planting Report number of 92.8 million. Additionally, the very late nature of corn planting comes with a yield drag and USDA, surprisingly for this time in the growing season, reduced projected 2019 yield to 166.0 bushels per acre. This is down from the USDA’s initial 2019 trend yield estimate of 176.0. These factors combine to significantly tighten the U.S. supply and demand situation with much of the growing season ahead.

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May Highlights

  • Record volume day for the Ag complex on 5/29 of over 3.2 million futures & options contracts traded.
  • Record Corn options volume day on 5/29 of 551,000 contracts traded.
  • Record Lean Hog options open interest on 5/30 of 433,436 contracts.
  • Record Lean Hog futures volume day on 5/7 of 142,408 contracts traded

Options Update

  • Corn implied volatility saw a dramatic increase throughout May, leading to a record single day volume record on May 21 (441,000 contracts), record monthly ADV (217,000) and record Weekly option activity.
  • Record Lean Hog short option open interest was established in May for producers based on CFTC Commitment of Traders report.
  • 48% of the volume on CME Globex was a spread, resulting in spread ADV of 173,000. The Grain & Oilseed complex averaged 58,000 verticals a day in May.
  • 18% of CME Globex Grain & Oilseed options were traded during non-U.S. hours for the month of May.
  • Black Sea Wheat options (BWO) traded 8,000 lots of options in May 19, up from previous high of 5,000 in April.
  • BWO trades mainly July and August calls. Open interest reached 15,755 lots on May 31.

Monthly Report

Callout Corner

Open Interest (OI)

  • Class IV futures OI +454% YoY
  • Class IV options OI +291% YoY
  • OI rising as the ‘products’, Butter and Nonfat, continue their streak