After the long-awaited Trump-Xi meeting on May 14 – 15 in Beijing, there was scope for disappointment with no major trades deals announced. However, the presidents did not disappoint and $17 billion in agriculture deals, mainly for soybeans, were announced in the days to follow. Given both soybeans and corn had rallied into the meeting, this was welcome news for traders. It gave reason to believe the bullish trend traders saw in 2026 in both corn and soybeans. Using the Ichimoku charts for the generic front-month futures in each product, I see bullish trends still in place. The top chart looks at the soybean market. You see that once it broke through the Ichimoku cloud in February, the cloud began to turn higher, indicating a new bullish trend. On subsequent sell-offs – for instance when the initial Trump-Xi meeting was postponed – the cloud always held as support. Now, with the RSI not overbought and the MACD showing signs of turning higher as well, there could be scope for higher prices. It is even a more bullish picture in corn, where the Ichimoku cloud began its trend higher back in November. While prices did move below the cloud at the start of the year, the lagging span never broke through. Prices then moved back through and have held support at the cloud on subsequent pullbacks.

The U.S. Drought Monitor shows that much of the United States is in drought. In severe drought in the southeast and mountain states, much of the corn and soybean region looks fine. There is drought in central and western Nebraska and light drought creeps into western Iowa and southern Minnesota, but most of Iowa and all of the Midwest looks drought free. This means farmers will not only be comfortable planting their crops knowing the soil has plenty of moisture, but right now, their planting does not look to be disrupted. While this is very good news for farmers, how will the market take it? Better planting conditions could begin to lead to traders worrying about supply issues that could hold back prices. While it is too early to think about this, as traders get more info via the WASDE report, this is a risk to the markets i.e., too much supply not a reduction in supply. 

In early May, the market did get an update on the planting progress. Perhaps traders should not be surprised that it was much better than expected. The report stated that 57% of the corn crop and 49% of the soybean crop had been planted. With conditions looking good in the next two weeks, there is reason to think a lot more progress is going to be made. There are always concerns in the back of traders’ minds that any hiccup in the planting season can cause a supply disruption that leads to higher prices. That is not the case right now. Could this begin to challenge, or at least slow, the rallies markets have seen in corn and soybeans?

Turning to the volatility markets, Soybean CVOL moved lower after the Trump-Xi meeting concluded. Right now, it sits roughly at the average of the past three years, neither too high nor too low. Turning to the skew ratio, I can see a lot of optimism building up for a move higher in futures, however. The demand for options appears to be largely on the upside, with the skew ratio trading at one of the highest levels of the past three years. While demand overall is mixed, it is clear option traders are pretty bullish. Does it create the potential for disappointment?

Corn CVOL and skew ratio have a very similar pattern. While Corn CVOL has moved higher of late, it still sits around the average of the last three years. The real interest is in the skew ratio. This level is close to the highs of the last three years, suggesting the demand that there is for options is happening on the upside. Traders appear to be positioning for a continuation of the trend higher in futures prices. Is there scope for disappointment if the supply in terms of acres planted is higher than expected?

Now it is time to decide where I want to express my opinion. For this, I need to turn to the term structure of implied volatility that traders can see in QuikStrike. I know that the next WASDE report will come out on June 11, and I see the importance of this report in the term structure. Why do I say that? The Friday June 12 expiration options (ZS2M6 and ZC2M6) are trading above the dates before and after indicating traders see a higher volatility for the day of WASDE.  What is more interesting to me is that in the Corn term structure, the July option (OZCN6) is trading at a sharp discount to all other expirations around it, even though it will also get the WASDE report. This looks like an opportunity to lean longer in Corn options even though the CVOL is average overall. This low point on the curve gives that opportunity. I don’t see the same discrepancy in Soybeans. While the WASDE trades at a premium, the other dates are very similarly priced.

In looking at both Soybeans and Corn, I come away with two different views. For Soybeans, I have gotten the bullish demand data with the trade deal announced. At this point, there is only scope for disappointment if China does not buy the beans that quickly. In addition, supply may come in higher than expected as it could ramp, mainly in Soybeans, in the coming weeks as planting is finished to meet this Chinese demand. Corn has trended higher for a longer period, and while it did not get the larger China news on demand, exports were quite strong last year. In addition, planting is more complete, which means supply side issues are less likely to have an impact.

For Soybeans, I think that means things are more likely to be range bound. Good news on demand may be met with higher supply, and supply growth will likely not overwhelm demand. Implied volatility is average, but traders are bullish so there is scope for disappointment. I think this sets up well for an iron butterfly and I look at the OZSN6 1170-1200-1230. Futures prices are currently near 1200, and this is the level where they have stalled in the past. Taking in 24 ticks for a 30-strike wide butterfly gives a potentially attractive four-to-one reward to risk if prices stall at the 1200 level once again. Perhaps the WASDE report is that catalyst so picking an expiration after the report makes sense.

I used the same expiration in Corn but recall it was trading at a sharper discount. As a result, I wanted to put on a more bullish bet. Corn implied is only average now, but the upside variance looks expensive. That means bullish bets can be more costly which is why I chose a call butterfly, opting to move the strikes to asymmetric levels so I can keep profitability on a bigger move higher. I used the OZCN6 475-500-510 call butterfly. This costs five ticks and if prices go to the center strike, I will make 20 ticks (35 strike difference minus the premium). Even if things move higher, all of the way through the upper strike, I will make five ticks. My risk is that futures prices stay below 475 at expiration and I lose the amount of premium spent. That still seems an attractive reward to risk.

Having the tools to analyze and the expiration flexibility to execute makes trading around catalysts interesting and enjoyable. The WASDE report is the next major catalyst for Ag options, and with this idea, I believe I am set up well to succeed for that report.

Good luck trading!

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