Q2 2021 Ag Update

  • 9 Apr 2021
  • By CME Group

Trade the South American Soybean Basis Synthetically

The CBOT FOB Santos Financially Settled (Platts) futures contract launched in September 2020 and has gained traction as a regional price discovery tool for South American soybeans. It trades on Globex next to the global benchmark CBOT Soybean futures contract. Both contracts represent prices for soybeans destined for export but reflect export values for each region. 

Because South American soybean exports historically trade basis CBOT Soybean futures, market participants can synthetically trade the FOB Santos basis by buying one contract and selling the other. Although both contracts tend to move in tandem, the relationship varies over time. Since September 22, 2020, the July FOB Santos premium to July CBOT Soybeans has averaged 89.15 C/BU but has been as high as 115.45 C/BU and as low as 47.42 C/BU. Having both North and South American futures contracts allows market participants to synthetically trade basis on South American soybeans with the transparency and security associated with CME Group Agricultural futures markets.

Hedge global soybean price risk using South American Soybean futures

CME Group researchers address the relationship between soybean prices in major importing and exporting countries and the usefulness of a cleared South American Soybean futures contract for managing global soybean price risk.

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New CME Group Boxed Beef Index bridges the gap between producer and consumer

US beef producers are generating the best quality product they have ever had with more than 80% of US beef graded “Choice,” or the highest grade, “Prime.” This has allowed consumers to buy steakhouse-quality beef at their local grocer – an option that hasn’t been available in the past. Last year, beef sales in US grocery stores and other retail outlets increased 26% compared to 2019. This change in supply and demand highlights the need for pricing tools that place more emphasis on the carcass and cuts of beef in conjunction with live cattle.

The new CME Boxed Beef Index is a five-business day, volume-weighted measurement of the daily Choice and Select Cutout prices. The “cutout” is an approximate value of a carcass calculated using the prices paid for wholesale cuts of beef, including the rib, chuck, round, loin, brisket, short plate, and flank. The CME Boxed Beef Index provides a new benchmark price for producers and those further down the supply chain, including wholesalers and retailers.

The CME Boxed Beef Index is the latest addition to the suite of Commodity Index Price Reports, which includes the Pork Cutout, Fresh Bacon, Lean Hogs, and Feeder Cattle Indexes.

Source: USDA

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Short-Dated New Crop options reach new open interest record

Short-Dated New Crop and Weekly options offer customers even greater precision around high-impact events, such as USDA reports and have become an increasingly popular tool over the last few years given the lower premium cost. Ag participants are now consistently using them to gauge market sentiment and manage risk, with average daily volumes up 122% for Weekly options and 29% for Short-Dated New Crop options year-to-date. Short-Dated New Crop options ended Q1 with over 128K contracts of open interest (OI) – a new OI record for the product.

Watch this three-minute video to learn why Short-Dated New Crop options are a cost-effective way to take a position in New Crop futures contracts.

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View the current version and an archive of the Ag Update online at cmegroup.com/education/ag-update.html

Data as of March 31, 2021 unless otherwise specified.

CME Group Volatility Index (CVOL)

Explore new views on leading grain market volatility ‒ uniquely possible via CME Group. This proprietary simple variance methodology produces a representative measure of the market’s expectation of 30-day forward risk for Corn, SRW Wheat, and Soybeans.

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New! Ukrainian Wheat futures and options

CME Group has expanded its wheat coverage in the Black Sea region with the introduction of Ukrainian Wheat (Platts) futures and options.

Key features of the contract are:

  • Complementary to our Black Sea Wheat futures and options contracts
  • Cash-settled to the daily Platts assessment for Ukraine Wheat 11.5% FOB deep sea ports
  • Available to trade on screen and through an active broker market
  • Price risk can be managed up to 15 months forward, starting with May 2021

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Pork Cutout futures and options gain momentum

  • Pork Cutout futures have over 2,600 contracts of open interest and an average daily volume of 226 contracts
  • Pork Cutout options have over 500 contracts of open interest and an average daily volume of eight contracts.

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