New crop corn and soybeans offer best returns in years
New crop values are soaring over example costs of production. These early opportunities are not guaranteed to hold through the growing season or into harvest. Bullish factors that have largely influenced old crop have also helped new crop prices to the highest levels in years!
The graph shows estimated returns through March 8. The graph includes new crop corn and soybean futures daily closes since early January minus an example new crop basis multiplied by an example yield. In these lines, the example yields were 201 bushels per acre (bpa) for corn and 56 bpa for soybeans. ISU example 2021 costs of production are subtracted to result in the new crop projections of returns above estimated costs for each crop.
Recent levels of return for corn above costs (nearly $225 per acre) are historic. I studied the maximum December new crop corn price offered from January - September of each of the past 5 years (2016-2020). Using similar methods as above (ISU yields, costs for each year). The average of those maximum prices for those five year equaled a return of $84 per acre. The very highest price offered in January - September over the past 5 years resulted in a return above costs of $200 per acre. These are not the ultra high returns of 2013, but $225 exceeds the best pre-harvest pricing opportunity of the past five years.
Similar to corn, the return above costs for soybeans (recently $164 per acre) is the best pre-harvest opportunity in years. I found the maximum November new crop soybean price offered from January - September of each of the past 5 years (2016-2020) and similar methods as above (ISU yields, costs for each year). The average of those maximum prices for those five year equaled a return of $25 per acre. The very highest price offered in January - September over the past 5 years resulted in a return above costs of $77 per acre. The recent $164 per acre in this example is two times the best opportunity offered for pre-harvest marketers in the past 5 years.
If you are nervous about selling a crop before it is realized, remember that Revenue Protection insurance with the harvest price being allowed to go even higher was designed well for pre-harvest marketing. For more on new crop revenue and how crop-insurance works with a pre-harvest plan (price and yield high and low), view our recorded webinar at: https://www.iowafarmbureau.com/Article/2021-Crop-Insurance-and-PreHarvest-Marketing-Webinar
Agenda: Crop Insurance starts at 2:47. Pre-Harvest Crop Marketing starts at 25:11 (you can skip a two minute technical glitch from 31:30 to 33:30)
As you review these margin opportunities for your farm with your costs and goals, remember to not base your marketing plan and your family's income on price prediction. No one can outguess the market direction or magnitude and it is your family’s income that is impacted by the risk. The corn and soybean markets are efficient. Market efficiency means that market price prediction is impossible because any information available is already efficiently incorporated into the market price. Markets move when market participants are surprised and predicting the unexpected is impossible.
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