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The last two months in the grain markets have been packed with volatility and opportunity for traders and hedgers alike.  Through the month of July, November soybean futures, known and referred to as the “new crop contract”, traded in a $1.20 range, or about 9%.    Though this is a relatively wide range, it was roughly half of the range that we saw in June which was $2.34. 

Uncertainty surrounding supply and demand along with geopolitical tensions were big catalysts for the rise in volatility which reached its highest levels since last August.  The sharp rise in volatility is in line with seasonal tendencies, much of which is related to the unknowns around weather and crop development.  That can be visualized with CME Group’s soybean CVOL index, found on CVOL.com. 

Hot and dry weather across many of the top producing states helped propel prices in late July, coming within 15 cents of the contract high which was marked back in April of 2022.  In the last week of July we saw good to excellent conditions at 52%, that’s 8% below the same period last year.  Recent weather forecasts show the potential for more precipitation coupled with near normal temperatures, if realized it could help those conditions improve which could be interpreted as a headwind to the markets.

Aside from weather, Market participants will be looking to the August USDA report, scheduled to be released on Friday August 11th, as a potential catalyst for price action.  With new crop weekly options expiring on the day of this report, Market participants may look to utilize these options as a cost-effective way to help manage price risk or express an opinion in the market.

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