Crop Progress & Agriculture Options Open Interest Report

Sep 06, 2018
Crop Progress and Agriculture Options Open Interest Header

With agricultural tariffs and trade wars on the top of every commodity traders mind, Straits took a look into this week’s crop progress report and agricultural option open interest at CME Group.

Crop Progress Report – Soybeans, Corn and Wheat

The National Agricultural Statistics Service, a statistical branch of the USDA, releases weekly crop conditions. Recent results seem to point to good underlying conditions for soybean and corn crops; for the 18 states that planted 96% of the 2017 soybean acreage, 66% of the soybean crop is reported in good or excellent condition compared to 65% the previous week and 61% for this time the previous year. For corn markets, the 18 states that planted 92% of the 2017 corn acreage, 68% is reported to be in a good or excellent condition in line with 68% the previous week, and 62% the previous year.

For Spring Wheat, it appears the harvest is well ahead of schedule with the 6 states that harvested 99% of the 2017 spring wheat acreage reporting 77% harvested compared to 60% for the previous week and 61% as the past 5-years average.

It seems that farmers have made the most of this year’s harvest as the August report from USDA shows that corn production yields are expected to average 178.4 bushels/acre, up 1.8 bushels from 2017, which would be the highest yield on record for the US. Soybean production is forecast to average 51.6 bushels/acre, up 2.5 bushels from last year. Wheat production is forecast at 1.88 billion bushels, up 8% from 2017.

This data seems to reflect positively for the agricultural fundamentals; the crops that are currently being harvested are in good to excellent conditions and wheat is ahead of schedule.

Cropland Value

Even though harvesting conditions are positive right now, one of several factors putting a strain on farmers is the increase in real estate prices for farming and cropland. Along with real estate in general, cropland and farm real estate values are rising just as trade war tariffs affecting agricultural industries from dairy to soybeans are starting to cause pain, prompting a $4,7 billion Farm Aid Bill from US President Donald Trump. As of August 2nd, the USDA reports that US cropland has averaged $4,130 per acre in 2018, representing an increase of $40 per acre from the 2017 average. The charts below demonstrate the rise in crop and farm value per acre since 2004.

Average Farm Real Estate
Average Cropland Value
Farming Income

The rise in cropland and farm real estate values, pricing pressure, and tariffs continue to threaten farmers’ income and agricultural trade. On August 30th, the USDA released its Farm Income Forecast with some grim predictions for US farmers. The USDA forecasts that net farm income is going to decrease $9.8 billion, or 13%, from 2017. Production expenses are expected to be up to $11.8 billion, or 3.3%, as a result of higher fossil fuel, interest, feed, and labor costs. In total, they expect the farm business average net cash income to decline $16,600, or 19.9%, to $66,700 in 2018. This decline would mark the 4th consecutive decline since 2014 and the lowest average income since the analysis began in 2010. The USDA expects the dairy farm businesses to see the largest of the declines.

Agricultural Option Open Interest

Many in the agricultural space are wondering what is next for soybeans, corn, and wheat. In derivatives markets, traders can look to the commitment of traders reports and options open interest for an indication of producer and money manager positions and price movement. While some options and futures open interest contracts are part of spread trading, which makes them harder to read, sometimes large open interest positions can provide signals of expected price moves. As a courtesy to our clients and audience, we’ve charted producer/merchant long and short positions against money manager positions in the 3 major agricultural futures markets: soybean futures, corn futures, and Chicago SRW Wheat futures. We have also taken futures options data from last Friday’s trade date at CME Group and made charts to show where the majority of option open interest contracts are for Soybeans, Corn and Chicago SRW Wheat in October and November expiration months.

To find out more about trading agricultural futures and options on futures at Straits Financial, please contact one of our representatives in the US at +1 312 462 4499 or in Singapore at +65 6672 9669. Straits is proud to offer clients access to over 28 major futures exchanges around the globe and is a direct member of the CME, CBOT, COMEX, NYMEX, CFE, Clearport, NFX, DME, and NZX. The global team at Straits Financial is at the forefront of developing new market access for clients and maintains a superior level of service for clients with live educational events, exclusive seminars and reports, daily market commentary, and 24-hour access to global markets. Contact us to learn more and sign up for our newsletter here.

Commitment Of Traders Report - Soybeans
Soybeans Call Options Open Interest
Soybeans Put Options Open Interest
Soybeans Call Options Open Interest November
Soybeans Put Options Open Interest November
Commitment Of Traders Report - Corn
Corn Call Options Open Interest
Corn Put Options Open Interest
Corn Call Options Open Interest November
Corn Put Options Open Interest November
Commitment Of Traders Report - Wheat
Wheat Call Options Open Interest
Wheat Put Options Open Interest
Wheat Call Options Open Interest November
Wheat Put Options Open Interest November

DISCLAIMER: This document is issued for information purposes only. This document is not intended, and should not under any circumstances to be construed as an offer or solicitation to buy or sell, nor financial advice or recommendation in relation to any capital market product. All the information contained herein is based on publicly available information and has been obtained from sources that Straits Financial believes to be reliable and correct at the time of publishing this document. Straits Financial will not be liable for any loss or damage of any kind (whether direct, indirect or consequential losses or other economic loss of any kind) suffered due to any omission, error, inaccuracy, incompleteness, or otherwise, any reliance on such information. Past performance or historical record of futures contracts, derivatives contracts, and commodities is not indicative of the future performance. The information in this document is subject to change without notice.  The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.