If you weren’t aware of the drought-like conditions in the Midwest this spring, then perhaps the headlines in Chicago in mid-May opened your eyes. On May 16, 2025, the weather service issued a dust storm warning for Chicago, the first such time it had done so. In fact, the weather service said this dust storm was the worst in Chicago and the surrounding areas since the Dust Bowl in the mid-1930s. This is not a good comp, as they say.

When you look at the current drought monitor that ran through the end of April and was released on the same May 16 date, you’ll see that it is more the southwest of the U.S. that is in the worst position. However, there is a band that runs from Nebraska through Iowa and into Illinois. While the region may be out of the worst of it, there is every reason to believe it has been a tough start to the planting season in 2025.

A good follow on X for agriculture-related news is Karen Braun from Thompson Reuters. In the past week, she has had two posts that I think were noteworthy. The top post shows the initial U.S. corn conditions rating. This rating came in at the lowest in six years and is in the top chart. The bottom chart has pictures of the delayed soybean planting from Illinois. The picture from this year shows a fairly negative early result on how far soybeans have come since they were planted on May 16. Neither data point suggests a good yield in corn and soybeans this year.

Following on with more from Karen, she referenced the U.S. net export sales data. With tariffs and trade top of mind in all markets, but particularly agriculture markets, this data is being watched closely. While corn and soybeans are at the very low end of expectations, soymeal and wheat are among the best data points in years. This points to a differentiated AG market as end customers and end products are making different decisions based on the current political environment and pricing.

One last post from Karen I wanted to highlight, and this was about the Argentinian wheat planting season. Planting has begun at a very healthy pace, suggesting a bumper crop could be in the works. In addition, the corn and soybean harvest is behind schedule due to heavy rains, however cold and dry conditions expected in the coming weeks should provide more clarity on how this harvest will ultimately look.

The next stop is traders positioning. I show here the Commitment of Traders reports for Corn, Soybean and Wheat futures. In the top chart, you can see that traders have reduced their large long that existed in February and are now flat at this point. In Soybeans, traders hold a small long position but nothing that stands out relative to levels markets have seen over the last three years. In both Corn and Soybean futures, positioning is very clean.  Wheat positioning may be another story, however. Position is short right now at a level only seen twice in the last three years, both times in 2023. Traders are leaning heavily short Wheat at the moment, potentially leaning into the bumper crop in Argentina and fading the strong net export sales.

The top three charts show the CVOL Index for Corn, Soybeans and Wheat, respectively. While Corn implied volatilities are near the mid-point for the past three years, both Soybeans and Wheat are near the lows of the past three years. With Corn and Wheat volatility, one can see co-movement of volatility and underlying price while no such co-movement appears to exist in soybeans.

Turning to the skew ratios, or the relative demand for upside vs. downside options, one can see rising ratios across the board, led by Soybeans and Corn. While the skew ratio in wheat has also risen lately, it is not as elevated as that in Corn and Soybeans, but instead, more at a mid-level seen over the last three years.

The next stop for me is the Event Volatility Calculator, where I can see how much volatility traders are pricing in for the upcoming WASDE report. This tool helps traders isolate exactly how much event volatility is priced in, indicating how much of a catalyst traders think the report can be. In the top chart, I see that the event volatility for Corn comes in close to 30%, which is well above any of the surrounding expirations, indicating high expectations for movement from the report. The opposite is true in Soybeans (middle), with event volatility of 12.25%, well below the other expirations. The WASDE report is not seen to be a catalyst for Soybeans.  Finally, in the bottom report, I see for Wheat an event volatility of 35%, again well above any other expiration. Big expectations in Corn and Wheat from WASDE with little expected for Soybeans.

Putting all of the data together, I have come up with three very different trades in each of the markets, since all have a slightly different set-up and expectations from the event.

The top chart shows the expected return for a Corn 440-430-425 put butterfly expiring the day after the WASDE report. This leans into three things: 1. News in the Corn market has been pretty downbeat on yields already, so there may be expectations of more bullish price news 2. Positioning has come down from a large long to flat, so traders may look to press a short if the news is not what is expected 3. There are high volatility expectations, so there is a reason to want to lean short volatility but in a defined risk sort of way. This lends itself to a put butterfly, particularly my favored butterfly of setting the strikes symmetrically so if the move is big enough I still will profit. As a result, I chose the 440-430-425 put fly where the maximum P&L would come if futures drifted lower and stopped at 430, but where I still make money even at levels below 425. The biggest risk of this trade is a move higher, where I would love only the premium invested. This sort of defined risk way to short a market that would benefit from a directional move lower and a move lower in implied volatility, sets up very nicely for the event.

Then I turn to the Soybean market, where I saw that there are very low expectations priced in for WASDE. This inclines me to want to be a net buyer of options, and when I look at the rest of the set-up, the direction is less clear. Traders are pretty flat overall. News has been negative like it has in corn, so one could see a move in either direction. In addition, the export news has been more mixed across the complex, with headline Soybeans coming in worse than expected but Meal being much higher than expected. Therefore, I buy a straddle struck at 1040 for the day after WASDE. Given it is a short-term trade, delta-hedging is probably not the goal here, though ahead of the event, it is a way to reduce the cost. However, ultimately a trader is playing a breakeven trade here, where profits are made on moves below 1015 and above 1065, with the maximum loss coming if futures finish near the strike of 1040. This is a higher risk trade for traders, however, with low expectations, this is a risk I think may be worth bearing, as traders could potentially benefit from a large move in either direction.

Finally, turning to Wheat, I again want to lean into the high expectations of the event. Traders are very short here as well, and the news has been bearish price, with both strong export sales and high expectations for Argentine harvest. However, I want to lean into that some and in spite of the high expectations, I focus more on skew ratio not being as elevated as in Corn and Soybeans. I look to have a leveraged downside position where I sell one of the 545 calls and use the premium collected to buy two of the 515 puts. This is solidly a consensus trade, and with consensus trades the risk is always a squeeze post the news. However, the consensus is not always wrong, and if the news is as bearish as expected, combined with negative technicals, having the extra leverage to the downside gives traders something to trade out of. I might suggest that this is a preferred way to be short Wheat into the event instead of short futures which looks to be a more crowded trade. One would still need to set a stop loss, but has some room and can stop out at the call strike, while there is inherent pressing of the short on the downside. Instead of a standalone idea, this ratioed risk reversal may be preferable to a short futures position.

This is a bit longer this month, so thank you for sticking with me. With the different set-up in each of the products, I wanted to highlight how to think about them and how to take advantage of what the market is giving you, something traders always want to focus on.

This month’s WASDE report is potentially set up to deliver some fireworks. At the very least, with the difficult start to the year, some clarity on what to expect for the rest of the summer will be critical. This is the best time to think about using options to express your views.

Good luck!

The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by [Data Resource Technology]. CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.

CME GROUP DOES NOT REPRESENT THAT ANY MATERIAL OR INFORMATION CONTAINED HEREIN IS APPROPRIATE FOR USE OR PERMITTED IN ANY JURISDICTION OR COUNTRY WHERE SUCH USE OR DISTRIBUTION WOULD BE CONTRARY TO ANY APPLICABLE LAW OR REGULATION.