
Prices for both 2024 crop corn and soybeans followed a familiar trajectory that year. Fleeting rallies stalled from winter to fall, losing gains only to reverse relentlessly lower into harvest lows.
But familiarity with this pattern didn’t breed contempt, at least for some farmers. Growers who hedged seasonal windows beat results from selling off the combine — in some cases by a lot.
Still, whether you use contracts at the elevator or trade Chicago futures and options, be warned: Farm Futures’ 40-year strategies study shows some tools are not created equal. All beat the harvest price on average for 2024 crops, avoiding losses suffered some years. But some options didn’t pay off, with early hedges in soybeans especially vulnerable. And the notion that risk equals reward appeared true only some of the time.
Futures and HTAs rule
The project looks at crops dating back to 1985, when options on agricultural futures began trading again after a decades-long ban.
Though not the result of actual trades, results per bushel and acre are figured to account for yield fluctuations from year to year, using official settlements from thousands of contracts. Cash prices from 11 locations for corn and nine for soybeans are considered.
The study assumes sales in the second week of April and third week of May, in addition to summer windows — for corn, that’s late June, and for soybeans, it’s mid-July. Hedges were liquidated when harvest at these locations reached the halfway point each year.
The biggest winner? Pricing crops using futures or hedge-to-arrive contracts was the most profitable strategy for both corn and soybeans. These tools fix a futures price while leaving the basis open until cash grain moves at harvest. Futures and HTAs averaged soybean gains of 35 cents per bushel, with corn topping the harvest price by 16 cents on average.
On one metric, these tools followed the “risk equals reward” doctrine. The variance for futures and HTAs in outcomes for both crops since 1985 was the largest of any strategy used.
Corn futures and HTAs, for example, earned $2.89 more than harvest when prices crashed with the collapse of the 2008 bull market.
And these early corn hedges lost $3.20 compared to harvest in the 2012 drought year, when December futures kept rallying after sales, surging to an all-time high of $8.49 ahead of harvest.
But by another measure, these futures and HTA sales were the least risky. The odds for beating harvest cash prices of both crops were 70% or better, the best “batting average” of any of the strategies.
Are puts worth cost?
Runners-up also bucked some economic conventions. Second place went to average pricing tools offered by many elevators that don’t try to pick individual sales dates at all. The average price from March 1to Sept. 1 earned that honor for both corn and soybeans, while the Jan. 1 to Sept. 1 average had the second-best odds of beating the harvest prices.
Options also provided some exceptions. The study looks at two ways of using these contracts as insurance against falling markets. The straightforward approach is to purchase put options that convey the right, but not the obligation, to sell futures at a predetermined “strike.”
But puts come at a cost — a premium paid up front that can evaporate as the market rises. Covering 2024 corn with at-the-money puts netted just 2 cents more than the harvest price, a pale comparison to the 56-cent gains earned by futures sales alone.
Unpredictable timing
One method traders use to reduce put charges is to couple a sale with the purchase of a call option, which conveys the right, but not the obligation, to buy futures. This creates a “synthetic” put.
These options can be “at the money,” with call strikes matching the selling price. The calls can also be “out of the money,” at a higher strike that offers less protection at
a cheaper premium.
The sell-futures-and-buy-call strategy beat put options alone, on average, for both 2024 corn and soybeans. But soybeans provided a quirk. Using an out-of-the-money call to cover sales creates an in-the-money synthetic put that should reflect more of the gains or losses by its underlying futures. This was true for corn in both 2024 and over all 40 years of the study.
But this tactic for soybeans netted a little less than the moves in futures, likely due to the unpredictability of its summer rallies’ timing.
Does strategy have legs?
A second cost-cutting tactic is to “leg” into the trade, buying the calls when prices tend to be weaker, at the end of February, April and May before the spring and summer sales are made.
These positions beat the harvest price easily at all locations for corn. But the April soybean sales fared worse than harvest in 2024, netting only few dollars per acre overall.
So what’s the bast way to sell? The answer is different for every farm, depending on its finances, experience and tolerance for risk.
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