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New-crop corn and soybean futures climb to highest point for this time of year since 2012.

Brian Basting, Commodity Research Analyst

December 27, 2021

3 Min Read
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Getty/iStockphoto/Maria Vonotna

The corn market has been resilient despite a near record U.S. harvest. For example, March 2022 corn futures on Wednesday, Dec. 22 traded over $6.00, equaling the highest price for the contract since July 1. New-crop December 2022 corn futures have also been firm, hovering near $5.50 after trading below $4.70 in early July.

This trend could have important implications for 2022 crop insurance. Crop insurance is a key component of crop production and marketing. Nevertheless, the review below will confirm that execution of flexible marketing strategies is a crucial supplement to crop insurance in the implementation of a comprehensive risk management program.

Corn price chart showing trends

The chart above depicts December 2015 corn futures from mid-December of 2014 through expiration. In December 2014, the contract peaked at $4.40 before sliding lower during January 2015. A recovery was seen in February, which is when the base crop insurance price is set. However, the February monthly average of $4.15 was $0.25 below the December high.

After trending lower the rest of winter and spring, the market recovered into mid-July but traded only slightly above the December high. Weakness was then seen into harvest with the October crop insurance price pegged at $3.83.

While not quite as strong as corn, new-crop soybean futures have also remained at an historically high level. For example, November 2022 soybeans this week traded above $12.50, which is nearly $3.00 above where November 2021 futures were trading a year ago and the highest price for a November soybean contract for this time of year since 2012. Crop insurance is a key component of crop production and marketing. The review below, however, will confirm that execution of flexible marketing strategies is a crucial supplement to crop insurance in the implementation of a comprehensive risk management program.

Related:Where is 2022 headed?

November 2015 soybean futures from mid-November of 2014 through expiration

The second chart depicts November 2015 soybean futures from mid-November of 2014 through expiration. In December 2014, the contract peaked at $10.39 ¾ before sliding lower during January 2015. A recovery was seen in February, which is when the base crop insurance price is set. However, the February monthly average of $9.73 was $0.66 below the December high.

After trending lower the rest of winter and spring, the market recovered into mid-July but traded only slightly above the December high at $10.45. Weakness was then seen into harvest, with the October crop insurance price pegged at $8.91.

Downside price risk

The key point is there is downside price risk from mid-December into the base pricing period of February. What makes the current strength in December 2022 corn and November soybeans even more important is that this week's USDA Supply/Demand report forecasts record corn and soybean production for the 2021/22 crop year for the key export competitors of Brazil, Argentina and Ukraine. Plus, soybean output in Argentina was forecast to rise 7% from a year ago.

Related:Did your farm have a good 2021?

Every year is different, and much can still change in South America and around the world. However, December 2015 corn futures and November 2015 soybean futures did decline significantly from December into the February pricing period. 

History has shown that price highs can be established at any time of the year, including prior to base crop insurance pricing period. Your Advance Trading advisor stands ready to partner with you in designing and executing a customized risk management strategy for projected 2022 production.

Contact Advance Trading at (800) 664-2321 or go to www.advance-trading.com.

Information provided may include opinions of the author and is subject to the following disclosures:

The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Brian Basting

Commodity Research Analyst, Advance Trading, Inc.

Brian Basting has been a Commodity Research Analyst for Advance Trading since September 1993. He is a market analyst for U.S. Farm Report and This Week in Agribusiness and a 4-H Hall of Fame Award Recipient.

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