Image 1: Temperature and precipitation outlook for the U.S.

Image 1: Temperature and precipitation outlook for the U.S.
Image 1: Temperature and precipitation outlook for the U.S.
Source: NOAA

As I sit down to write this week, I am happy to be indoors in the air conditioning as it is in the mid-90s outside right now. This hot weather is expected to continue throughout the week. It had me thinking about what impact this could have on corn and soybeans this summer. Depending on which region you read about, some areas already had some concerns for this year given the late planting in many parts of the Midwest. While it helped alleviate the drought conditions that persisted last year, steady rain in many areas, particularly in Illinois where I am from, meant that farmers were still planting late into May, bringing about some risk of lower yields. If these younger plants have not established deep roots yet, this heat wave we are going through could have negative effects on crop yields. I went to the National Weather Service for its outlook on the weather over the next couple of weeks:

Outlook: An early-season heat wave will grip much of the South, East and lower Midwest for the remainder of the week. With soil moisture adequate in many areas and with Midwestern summer crops having not yet reached the reproductive stage of development, Corn Belt impacts from the heat should be minimal. In parts of the South, however, high temperatures frequently approaching or reaching 100°F could adversely affect reproductive corn. In contrast, stormy weather will cover the northern and central Plains and upper Midwest, with five-day rainfall totals expected to reach 1 to 4 inches or more. The NWS 6- to 10-day outlook for June 22 – 26 calls for hotter-than-normal conditions nationwide, except for near- to below-normal temperatures in parts of southern Texas. Meanwhile, wetter-than-normal weather in western Washington and east of a line from south-central Arizona to the western Dakotas should contrast with near- or below-normal precipitation across the northern High Plains and much of the West.

This outlook sounded to me more upbeat than I would have expected. As hot temperatures can have a larger effect on corn than soybeans, and the warm evening temperatures do not increase the respiration in soybeans as much as corn, all eyes will be focused on the upcoming USDA release to see the relative proportions of corn and soybeans planted this year. 


Image 2: USDA weekly export sales as of June 6, 2024

Image 2: USDA weekly export sales as of June 6, 2024
Image 2: USDA weekly export sales as of June 6, 2024
Source: USDA export sales

Image 3: Commitment of Traders report for corn and soybeans


Image 4: Technical charts for the third futures contract in Corn and Soybeans


Image 5: CVOL analysis of Soybeans, Corn and the comparison of the two


Image 6: Event Volatility Calculator for USDA Acreage report on June 28


Image 7: Implied volatility surface for New Crop Weekly options in Soybeans and Corn


Image 8: 1 by 2 call spread in CN1N4 New Crop Weekly Corn options vs. a long Corn futures contract


Image 9: Short an 1150-1180 call spread vs. long the 1100 puts in SN1N4 New Crop Weekly Soybean options