For corn and soybean producers, activity in futures markets in February is very important. For many producers, projected crop insurance prices and volatility factors are determined from February 1-28. The projected price will set revenue guarantees and potentially affect planting decisions. At the start of February 2023, December 2023 corn futures ($5.94) were slightly above last year’s projected crop insurance price of $5.90 per bushel and November 2023 soybean futures ($13.65) were well below last year’s futures price of $14.40. The direction of prices from now until the end of February will be key for producers when examining risk management and marketing strategies for the 2023 crop.
Every year, during winter producer meetings, when discussions turn to risk management and marketing strategies, someone inevitably states that December corn and November soybean futures tend to fall during the projected crop insurance price determination period (February 1-February 28, in Tennessee and numerous other Mid-South states). This statement usually coincides with the assertion that external forces (government and/or global grain companies) are moving markets to reduce premium expense or foster utilization of other price risk management tools to boost profits.
Does a simple analysis support this? No. From 2010 to 2022, the data does not back this claim (Figures 1 and 2). Instead, the data shows prices follow the month-over-month price trend. For example, December corn average monthly prices from December to April declined in 2010, 2013, 2015, 2019, and 2020. For 2011, 2014, 2018, 2021, and 2022, December corn futures prices increased. The remaining years 2012, 2016, and 2017, showed no trend and moved mostly sideways over the five-month interval. For the November soybean contract, average monthly prices from December to April declined in 2013, 2015, 2017, 2019, and 2020. For 2011, 2012, 2014, 2016, 2018, 2021, and 2022, November futures contract price increased. The remaining year, 2010, had no trend and moved mostly sideways over the five-month interval.
What does this mean for the 2023 crop insurance price determination period? Not much. This is a backward-looking metric; the trend is not revealed until the trend has occurred. However, a small month-over-month average decline occurred between December and January for both corn and soybean harvest futures. The final projected crop insurance prices for corn and soybeans will be important to producer marketing and risk management decisions moving forward.
Figure 1. Monthly average December corn futures prices from December to April, 2010-2023
Figure 2. Monthly average November soybean futures prices from December to April, 2010-2023
Barchart.com. December Corn and November Soybean Historical Daily Closing Prices. Accessed at: https://www.barchart.com/futures/quotes/ZCZ23/historical-download and https://www.barchart.com/futures/quotes/ZSX23/historical-download
USDA – Risk Management Agency (RMA). Price Discovery. https://prodwebnlb.rma.usda.gov/apps/pricediscovery
Author: S. Aaron Smith
Associate Professor, Crop Marketing Specialist
University of Tennessee
Smith, S. Aaron. “Do Corn and Soybean Harvest Futures Rise or Fall During the February Projected Crop Insurance Price Determination Period?” Southern Ag Today 3(6.1). February 6, 2023. Permalink