Q1 2023 Agriculture Update

  • 6 Feb 2023
  • By CME Group

Now live: New Crop Weekly options

Introducing more ways to manage short-term exposure. The new product is an extension of Short-Dated New Crop options, with listing cycles occurring every Friday in February through August.

How you can benefit:

  • Shorter time frame and historically low volatility resulting in reduced premium costs.
  • Hedge around high-impact events such as USDA WASDE reports pinpointing new crop exposure.
  • Hedge crop insurance prices at multiple points during the average price window in February.

How they are designed:

  • Underlying futures are based on December Corn and November Soybeans.
  • Option expiration every Friday that is not a Short-Dated expiration from February through August.
  • Options are listed up to four weeks out.
  • Offer the same tick size, strike interval, and expiration as standard options.

Asia Agricultural markets turn to regional liquidity

A growing number of Asia-based clients are participating in our exchange-traded Agriculture markets, particularly our benchmark Soybean Meal, Soybean Oil, Corn, Soybean, and Wheat futures markets.

Commercial hedgers have expressed a preference to be able to manage price risk for these trade flows during the Asia trading day, but a lack of liquidity made doing so a challenge. The higher trading volumes and tighter traded markets in the Asia day has made greater participation possible from the region.

This has created consistent futures trading volumes during the Asia time zone at competitive bid/ask spreads rather than relying on the U.S. traded markets to execute traded volumes. This deepening in liquidity provides a platform for clients operating in Asia time zone to better manage price risk.

Source: CME Group

An active year for Calendar Spread options

Calendar Spread options had the highest ADV ever in 2022, with over 2K trading a day and the highest average open interest of 72K contracts. With Corn and Soybeans trading at an inverse for most of 2022, market participants have traded Calendar Spread options in record fashion.

Calendar Spread Options offer alternative hedging capabilities compared to standard options, and can provide a more precise hedge against adverse movements in price spreads. They provide a better risk management device for hedgers and market participants exposed to calendar spread risks. 

Source: CME Group

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

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

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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 July 29, 2022 unless otherwise specified.

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