Approaching the Prospective Plantings Report with New Crop Options
The suite of CME Group new crop options can provide market exposure to Prospective Plantings (sometimes referred to as Planting Intentions), an annual report released by the USDA at 11:00 a.m. CT (12:00 p.m. ET) on the last business day in March. The report contains the expected planting acreage for the upcoming crop year, as well as the previous year’s harvest for principal crops. This year’s Prospective Plantings report will be released at 11:00 AM CT on March 28, 2024.1
Past Prospective Plantings rallied new crop markets
Prospective Plantings is widely regarded as one of the most impactful USDA reports released throughout the year because it provides an early meaningful indication of the new crop year’s acreage. As such, the report can be particularly powerful with respect to new crop instruments December Corn and November Soybeans. Reporting on the prior year’s harvest (the old crop) is a notable secondary function of the report. Together, these indicators can affect the old-new crop spread.
In both 2021 and 2022, market expectation overshot the reports’ acreage significantly, sending some Corn futures limit up on both release dates when the reports’ numbers fell short of polling. Entering the March 31, 2021, Prospective Plantings report, the market had baked in the expectation of 932 million acres, overestimating the report’s 91.144 million acres by 1.856 million acres. December 2021 (new crop) Corn futures settled at limit, 25 cents above the day’s opening price, on March 31, 2021. The report marked the beginning of a price rally in Corn that lasted until May.
[1] This year’s report will fall on a Thursday to reflect the March 29, 2024, Good Friday holiday.
[2] Bloomberg PPLNCORN Index median estimate
Figure 1: December 2021 Corn futures
The next year’s polling estimate of 923 million acres missed the mark again, with only 89.490 million acres of corn reported to be planned in the new crop year according to the March 31, 2022, Prospective Plantings. This surprise sent December 2022 Corn futures settling 27.75 cents above the day’s opening price on March 31, 2022. Like in 2021, the report release marked the beginning of a weeks-long price rally in new crop Corn futures.
[3] Source: Bloomberg PPLNCORN Index median estimate
Figure 2: December 2022 Corn futures
Notably, the 2022 Prospective Plantings report had a significantly greater impact on the new crop (December) Corn futures than it did on the front-month (May) futures. Although the report sent May 2022 Corn futures price upward, the instrument closed only 10.75 cents above the day’s open. The May-December Corn futures spread thus narrowed by 17 cents – from 82 cents on March 30, 2022, to 65 cents on the March 31, 2022, daily settle.
Figure 3: May and December Corn futures price movement on Prospective Plantings (c/bu)
Although December 2023 Corn futures saw minimal daily price movement on the March 31, 2023, Prospective Plantings report, the instrument saw intraday price movement greater than any trade date in the prior month. May 2023 Corn futures rallied more than 10 cents per bushel on the day.
Figure 4: December 2023 Corn futures
New crop instruments enable a nuanced view
The varying impact of Prospective Plantings demonstrates the distinctive dynamic profiles of old crop and new crop instruments and the fundamental nature of the report as a commentary on the year’s upcoming crop. The CME Group suite of new crop options allows market participants to pinpoint their new crop view with a variety of tenors offered.
For the upcoming March 28, 2024, Prospective Plantings release, a New Crop Week 5 option (CN5H4) would allow precision exposure to the new-crop impact of the report: the option expires that day. A May 2024 Short-Dated New Crop option (OCDK4), on the other hand, gives the user exposure to new crop Corn futures movement through April 26, 2024, allowing them to ride tailwinds from the report. A Week 1 April 2024 New Crop Weekly option (CN1J4) would serve as middle ground, expressing a view of market impact of the report between CN5H4 and OCDK4 with an expiration date of April 5, 2024.
[4] Given the Good Friday holiday, the New Crop Week 5 Corn option will expire on Thursday, March 28, 2024.
[5] Given the Good Friday holiday, the March 2024 Week 5 Corn option will expire on Thursday, March 28, 2024.