This article examines the daily closing price frequency for the November soybean and December corn futures contracts from November 1st to contract expiration for soybeans and December 1st to contract expiration for corn for the 2010 to 2023 (to September 22, 2023) crop years. Figures 1 and 2 show the frequency of closing prices by price range (bars) and cumulative price frequency (line). The total number of daily closing prices are 3,600 for soybeans (Figure 1) and 3,629 for corn (Figure 2). Figure 1 shows that 14.0% of the daily closing futures prices for the November soybean contract were between $9.50/bu and $10.00/bu. Figure 2 shows 21.1 % of the daily December corn futures price closings were between $3.75 and $4.00. The November soybean futures daily closing price was below $14.00/bu 92.1% of the time and the December corn futures daily closing price was below $6.00/bu 85.1% of the time over the period considered.
As of September 22, 2023, the December 2024 corn futures price was $5.07/bu and November 2024 soybean futures price was $12.56/bu. This is down substantially from recent highs, but at the mid to higher price in terms of historical price frequency. Weak US soybean export demand from China paired with record Brazilian soybean production has resulted in relatively lower futures contract prices for 2024. Corn has also had downward price pressure given a 15.13-billion-bushel 2023 U.S. crop, estimated US ending stocks of 2.22 billion bushels, and no indicators for significantly stronger corn demand in 2024.
So how can these data guide a risk management decision? Consider a simple options fence strategy. On September 22, an $11.40/bu November 2024 put option could be purchased for 31 ½ cents, and a $14.00/bu November 2024 call option could be sold for 35 ½ cents (net premium gain of 4 cents). This strategy sets a futures market price floor of $11.40/bu by setting a lower fence removing approximately 55% of the historical downside futures price risk at the cost of forgoing 7.9% (i.e., 100% – 92.1%) of the historical upside in futures prices by setting the upper fence (Figure 1). Similarly, for corn, buying a $4.50/bu December 2024 put option for 16 ½ cents and selling a $6.00/bu December 2024 call option for 15 ½ cents (net premium expense of 1 cent) would set the lower fence at $4.50/bu – removing 55% of the historical downside futures price risk at the cost of forgoing 14.9% (100% – 85.1%) of the historical upside in futures prices due to the upper fence. Producers may want to examine risk management strategies that protect against downside futures market price risk at the cost of some upside potential.
Figure 1. November soybean closing futures price frequency, 11/1/09 to 9/15/23.
Figure 2. December corn closing futures price frequency, 12/01/09 to 9/15/23.
References and Resources
Barchart.com. https://www.barchart.com/futures/grains?viewName=main
Smith, Aaron. “Corn and Soybean Harvest Futures Contract Price Frequency.” Southern Ag Today 3(40.1). October 2, 2023. Permalink
