Q3 2020 Ag Update

  • 4 Aug 2020
  • By CME Group

South American Soybean Futures

South America has become a major producer and exporter of agricultural products and the home to many users of our global benchmark risk management products. CME Group and B3 have combined efforts to develop a suite of South American regional products to manage risk in this region. The initial focus of the partnership will be on developing a South American soybean contract that will target international customers trading on CME and then another focused on Brazilian customers trading on B3.

Key Benefits

  • A more effective hedge for South American producers, exporters, and importers of Brazilian soybeans ‒ as it reflects export price at the port of Santos
  • An opportunity to trade the spread between North American and South American soybeans, and effectively the South American soybean basis
  • Available for screen trade on CME Globex or block trade reported via CME ClearPort

While our US-based Grain and Oilseed futures contracts are the global benchmarks for price discovery and risk management, we continue to add regional products like this to provide market participants with a full suite of risk management tools.

Tentatively, we expect these to be available for trade in Q3 of this year.

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Pricing, Volatility and Strategy Tools

CME has a suite of free QuikStrike tools to calculate theoretical prices and Greeks on CME Group options, chart volatility, and correlations, and to test strategies in simulated markets.

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CME Group first listed cleared Fertilizer swaps in 2011 for Urea, UAN, and DAP. However, not all market participants could access the cleared swaps. Since June 2019, Fertilizer futures have been listed and available to improve market access.

Key Features

  • Financially settled against leading fertilizer price reporting agencies: Profercy and ICIS
  • Low minimum block threshold of 2 contracts - Find the Fertilizer broker directory here
  • 100-ton contracts
  • Includes: Urea US Gulf, Urea Egypt, UAN NOLA, DAP NOLA, Urea Brazil, and MAP Brazil

White Paper: Block Cheese Futures & Options – A New Hedging Tool

Launched in January of this year, Block Cheese futures and options are the latest agricultural products launched by CME Group. They have already garnered a great deal of open interest among dairy risk managers. Read Block Cheese Futures & Options - A New Hedging Tool, written by Sara Dorland of Ceres Dairy Risk Management to learn more. The white paper uses real-life examples to demonstrate the importance of utilizing hedging tools that more precisely represent the underlying markets for which you are managing risk and the difference in hedging effectiveness when you do not.

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Stay on top of all ag-related news by following the CME Group Agriculture Showcase Page on LinkedIn or CME Group on Twitter:

LinkedIn: https://www.linkedin.com/showcase/cme-group-agriculture

Twitter: https://twitter.com/CMEGroup

Options Update

  • Class III Milk options hit multiple volume records throughout June, the largest occurring on June 26 with 16,341 contracts traded.
  • The entire dairy options complex has experienced unprecedented volatility and price action recently, with open interest hitting a record high of 204,199 on June 30.
  • Block Cheese options were launched January 13, adding a seventh option product to the dairy complex.
  • We observed historically low implied volatility in Soybeans and Soybean Meal during June, and it was only the second time Soybean Oil had higher implied volatility than Meal and Soybeans in the August contract.
  • August Lean Hogs stayed at a historical high implied volatility, given Covid-19 concerns as well as the ongoing ASF situation.

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Black Sea Futures and Options

  • Black Sea Wheat trading volumes were up 28% to end June compared to 2019 – ADV of 1,100 lots.
  • Black Sea Wheat futures volume reached a high of 27K contracts in April (ADV of 1,265 contracts), an increase of 275% vs April 2019.
  • Black Sea Wheat futures OI hit a high of 28K, up from 17K during the same month last year.
  • Black Sea Corn options traded for the first time ever in June – 700 lots of the November 2020 contract.
  • Read: Hedging Opportunities using Black Sea Wheat futures https://www.cmegroup.com/education/articles-and-reports/hedging-opportunities-using-black-sea-wheat-futures.html
  • An update on Black Sea Market fundamentals from Dan Basse and Dave Hightower: www.cmegroup.com/blacksea

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Black Sea Futures and Options

Q1 Black Sea Wheat and Corn futures and options volumes reached 68K contracts (ADV 1.1K), up 35% over Q4 2019.

Q1 Black Sea Wheat futures traded 58K contracts (ADV 935), a 75% increase over Q4 2019.

At quarter-end, Black Sea Wheat open interest exceeded 25K, mostly in new crop out to December 2020.

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