For traders, a rise in volatility can illustrate a rise in uncertainty and potential for opportunity, which for grain markets fits in line with seasonal tendencies, says Oliver Sloup with Blue Line Futures. So, what’s behind the uptick in grain market volatility? And what are farmers watching ahead of the USDA WASDE and Acreage reports?
What a week!
July soybeans traded in an 84 1/2 cent range last week. Trading to their lowest levels since January 2022, but rebounding to post the highest closing price since May 16th. For the week, July beans were 15 1/4 cents higher. Resistance to start this week’s trade comes in from 1358 3/4-1365 3/4. If the Bulls can chew through this pocket, potentially se see an extension of the relief rally, with the next resistance pocket coming in closer to 1400. Be sure to sign up for a trial of our daily technical and fundamental grain commentary at the bottom of this article to get the full version of our daily reports.
How are Funds positioned?
The most recent Commitment of Traders report (through 5/30/2023) showed funds holding a net long position of 529 futures/options contracts, about as neutral as you could get. Broken down, that’s 76,883 longs versus 76,354 shorts. This is the smallest net long position since May of 2020, which was on the back of funds coming out of a net short position at the end of 2019 and into 2020. It’s been a few years since we’ve seen Funds net short soybeans, but it used to be a common occurrence from 2015-2020.
A rise in volatility
We saw soybean volatility rise through the month of May, rising from 16.81 on May 1st to 24.19 on May 31st, the highest level since last fall. The rise in the SVL indicates a rise in uncertainty, which correlates with options pricing. With the rapidly changing headlines and prices, new crop weekly options and short dated options could be a great tool to consider using. The short time frames can make it a cost-effective way to help manage short term risk or express an opinion in the market. If you have questions about these, please reach out to Oliver@BlueLineFutures.com.
Sign up below for a FREE trial of our daily fundamental and technical commentary!
