Excell with Ag Options: Examining a Relative Value Trade Strategy with Soybean and Corn Options Ahead of the September WASDE Report

^{Source: USDA}

The charts above recap what the August WASDE report told traders about crop condition, yield and production. You can see in the top chart that the crop condition continues to track along the best of the past five years as it has all year long, as good as the crop in 2020. For those who recall 2020, corn prices stayed subdued through August, but rallied sharply from September and through the end of the year as the conditions still stayed strong but moved more in line with previous years. 

One can see in the other charts that corn yield expectations moved up by 3.3% in the last report, such that the total crop production estimates for this year came in at 15.1 billion bushels, down about 1% from where they were last year. These were roughly in line with the estimates of the market ahead of the report, possibly explaining the more muted, but still negative, reaction to the price of corn to the report.