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Do Corn Options Update Volatility Expectations in the Wake of USDA Reports?

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  • Yao Yang
  • Andrew McKenzie

Abstract

This paper investigates the information value of U.S. Department of Agriculture (USDA) crop reports in terms of their impact on rational agents' expectations of future realized price volatility. While it is well known that uncertainty—proxied by options market implied volatility—is reduced in the wake of USDA reports, this is the first study to examine whether the information contained in USDA reports impacts market agents' ex ante expectations of realized volatility (RV). We use a Hamilton‐type approach to reveal how August crop reports refine volatility expectations, and movements in RV in the post report period mirror these expectations. Importantly, in the wake of the USDA report releases, corn options partially reflect updates in volatility expectations. These updates are not instantaneous, highlighting potential short‐term pricing misalignments over the first 2 days following the report release.

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  • Yao Yang & Andrew McKenzie, 2025. "Do Corn Options Update Volatility Expectations in the Wake of USDA Reports?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 45(10), pages 1852-1868, October.
    • Handle: RePEc:wly:jfutmk:v:45:y:2025:i:10:p:1852-1868
    DOI: 10.1002/fut.70020
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