2025 Corn Pricing Dilemma
What’s Happened….
2025 corn prices are not all that attractive, with futures currently trading near $4.40. Yet, when compared to the price of soybeans (trading near $10.00 on November 2025 futures), farmers are eyeing up the idea of planting more corn acres as opposed to soybeans just to pay the bills. Is it a good idea to defend $4.40 when there are two growing seasons ahead of final production for 2025 (Southern and Northern Hemispheres)? Time will tell. Is there a best tool or strategy to use? We’ll explore several as the calendar flips to a new year.
Why this is Important….
Unless adverse weather developments occur, just the idea of adding two or three million acres is a bearish outlook for corn prices. If 3 million are added with a yield of 180 bushels, this equates to an increase of 540 million bushels of carryout, assuming no other supply and demand line-item changes. Projected carryout could increase to over 2.2 billion, pointing to a likely sub-$4.00 December futures harvest price with downside potential to $3.50.
As for the best marketing tool, there probably isn’t one that currently resonates well. Forward contracting aggressively could be a big mistake should prices rally. If forward selling, it may be a good idea to purchase call options to cover sold bushels. Buying enough time value for call options to cover adverse weather conditions suggests buying September or December calls. Due to time value, this may be costly, which in turn makes forward selling less inviting. Short-dated call options are an alternative. They are based off December futures and have a shorter time window. Short-dated options may be a viable tool, yet for many, the prospect of forward contracting at the current price levels (near or below the cost of production) and buying calls (traditional or short-dated) just doesn’t look attractive. Selling futures or using hedge-to-arrive contracts may have a place in the marketing mix, yet at current prices, also come with their own challenges. Futures can be flexible in the sense you are not married to the position, meaning you can exit and enter as you want. Hedge-to-arrive contracts can be attractive as the buyer meets the margin, however, you are required to deliver and have exposure to basis risk.
What can you do about it?
Unfortunately, there are no easy answers with record production forecasts in the Southern Hemisphere. Yet strong exports so far this marketing year and potential for weather concerns could support higher prices. Exploring options to provide a price floor may be the best bet at this time. Purchasing a put establishes a price floor. This leaves upside potential unlimited for unpriced grain. Purchasing a put and selling an out-of-the-money call can reduce your net cost if you are willing to accept a cap on price and meet margin call. This strategy is called a fence because you are fencing in a range of prices. This leaves a window of opportunity open to the strike price of the sold call. For many, this may be an attractive strategy. Again, however, risk is unlimited, you are subject to margin calls, and you must be willing to accept a hedge position (short futures) at the sold strike price.
Regardless of the strategy, which includes doing nothing, a risk and reward assessment needs to occur before making decisions. Rarely is there an easy answer. Taking time to evaluate strategies is an important function that requires dedication and discipline. Getting started is sometimes the most challenging. Once a plan is in place and execution occurs, future decisions may be easier.
Find out what works for you….
Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally charged responses to market moves, which are always dynamic.
About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.
Author
Bryan Doherty