Grain marketing with low prices

Farmers have a tough decision trying to market their crops at the appropriate time, at profitable levels, and at the highest price possible. Previous years’ higher prices made it hard for farmers to market their 2023 crops. Now in July, farmers must develop an exit plan for the 2023 crop and determine a marketing plan for the 2024 crop.

Selling the 2023 crop

Current prices available for 2023 corn are $1.59 below the low price in 2022 and the soybean price is $2.39 below the low price in 2022. Costs on the 2023 crop varied from $5.00 to $5.43 for corn and $13.00 to $13.84 for soybeans, thus another reason for the slow sales. Farmers with grain in the bin must determine an exit plan for these unsold bushels.

Seasonally, high corn prices are above average from March through July 1 and soybean prices are above average from March through August. It has been hard for farmers to price the 2023 crop at lower current prices below their breakeven prices. But now with a new crop coming, they must sell the old crop. Target prices can still be used, but default dates to force sales will be an important part of an exit strategy. At some point, a cash sale will be necessary.

Farmers not satisfied with these prices on the cash sales can re-own with a call option, but at the money, calls are expensive, and many options expire worthless, so a farmer needs to set goals on these call options too.

Find the breakeven point for 2024

For the 2024 crop farmers should first determine their breakeven cost estimates for 2024 crops. Costs for 2024 corn range from $4.75 to $5.40 and $13 to $13.85 for soybeans for marketing groups I work with. With these breakeven prices, farmers have had little to no opportunity to sell the 2024 crops, leading to lower sales than normal.

Some farmers are only interested in selling a small portion pre-harvest while others will sell a large percentage of their crop pre-harvest. Revenue insurance plays an important role in pre-harvest marketing with spring 2024 revenue prices of $4.66 for corn and $11.55 for soybeans. These prices can act like a put on the 2024 crop on the farmer’s coverage level, insured bushels.

Farmers can also purchase call options if they are concerned prices will continue higher after they have completed pre-harvest sales. Unfortunately, prices for 2024 crops are hovering at low contract prices.

Farmers should develop a marketing plan and determine if current prices offered for 2024 crops would generate a profit for their farming operation by covering their breakeven prices. If those prices are not available, farmers should use crop insurance for puts until the crop is harvested and consider buying put for unsold grain if they are concerned about lower prices or buy calls on previously sold bushels in case the prices rally.

With all marketing plan tools, farmers need to set reasonable goals, so their options don’t expire worthlessly. Default dates are helpful tools, but if current prices are below the farmer's cost of production, those sales might not happen.