Category: Crop Marketing

Agriculture is inherently risky, with producers facing a complex array of production, market, and financial risks. These risks can significantly impact farm profitability, necessitating robust risk management strategies. Risk management in agriculture has become a complex system of financial instruments and strategies, with crop insurance and forward contracting serving as two key components.

Forward contracting allows producers to mitigate price risk by securing a predetermined price and buyer for their grain. This approach can be especially attractive due to the potential weather risk premium embedded in forward contract grain prices. Buyers are often willing to pay higher prices to hedge against weather-related uncertainties affecting crop production, which allows farmers to lock in favorable prices and potentially increase their revenue. However, it’s crucial to note that while forward contracting addresses market risk, it does not directly mitigate production risk. Aggressive use of forward contracting can expose farmers to unexpected yield risk as farmers may be unable to meet contracted quantities, leading to non-delivery penalties imposed by elevators and potentially substantial financial losses.

Farmers can also purchase crop insurance as a complementary risk management tool to address the production risk associated with forward contracting. The federal crop insurance program offers various products, with yield (YP) and revenue protection (RP) accounting for 71% of the $158.6 billion of liability in 2024 (USDA-RMA, 2024). YP provides production risk management using a farm-specific Actual Production History (APH), while RP additionally provides price risk management using futures prices. Pairing forward contracting with either insurance product could potentially help offset non-delivery penalties and reduce the financial burden on farmers who experience yield shortfalls. The combination of forward contracting and insurance protection allows farmers to confidently engage in more aggressive marketing strategies. By protecting against both price and yield risks with RP and yield risk with YP, this integrated approach could potentially lead to a more stable farm income and improved overall risk management.

We provide a visual example of how these two risk management tools can work together in Figure 1 below. The red bar is the potential revenue generated from corn production by locking in a price of $4.50/bushel via a forward contract at a farm yield expectation of 200 bushels/acre. If a farmer booked 80% of expected production, the expected revenue from forward contracting would be $720.00/acre. The blue bar behind the red bar shows an RP crop insurance policy at 80% coverage that is layered underneath the expected revenue from forward contracting which guarantees $744.00/acre.

Figure 1. Layers of Protection Provided by Simultaneously Using Revenue Protection (RP) Crop Insurance and Forward Contracting in the Local Cash Market 

NOTE: The purpose of this figure is to show two different “layers” of revenue coming from two different revenue risk management tools: forward contracting and RP crop insurance. The forward contracted revenue is in red while the crop insurance revenue guarantee is in blue behind the forward contracted revenue.

To illustrate the importance of this “layering” strategy, consider when a yield shortfall occurs leaving only 150 bushels/acre to sell at the forward price of $4.50/bushel rather than the 160 bushels/acre promised for delivery. This leaves a 10 bushel/acre shortfall. The local grain elevator is offering a cash delivery price of $4.00/bushel with a $0.05/bushel non-delivery penalty resulting in a non-delivery price of $4.05/bushel, and therefore, a total penalty of $40.50/acre. The resulting harvest revenue is about $635.00/acre (see table 1). Despite the penalty, the RP policy – which is in blue underneath the forward priced grain – provides an indemnity of $121.00/acre at a producer-paid premium of $56.00/acre. This results in a final cash revenue of about $700.00/acre rather than $635.00/acre, showing how the RP policy was able to pull crop revenue almost completely back to the expected amount of $720.00/acre despite the inability to fully deliver the promised amount (see table 2). This finding highlights the benefit of locking in prices during spring time as part of a pre-harvest marketing plan.

Table 1. Calculating Crop Revenue Using a Forward Price and Non-Delivery Penalty

Expected Yield (a)	200 bpa
Booked Yield (b = 80% x  a)	160 bpa
Realized Yield (c)	150 bpa
Yield Shortfall (d = b – c)	10 bpa
Forward Price (e)	$4.50/bushel
Harvest Price (f)	$4.00/bushel
Non-Delivery Fee (g)	$0.05/bushel
Non-Delivery Price (h = f + g)	$4.05/bushel
Forward -Priced Revenue (i= c x e)	$675.00/acre
Non-Delivery Penalty (w = d x h)	$40.50/acre
Revenue with Penalty (i– w)	$634.50/acre

Table 2. Including Crop Insurance in the Crop Revenue Using a Forward Price and Non-Delivery Penalty

Revenue with Penalty (a)	$634.50/acre
Crop Insurance Indemnity (b)	$121.00/acre
Revenue + Indemnity (c = a + b)	$755.50/acre
Producer Premium (w/subsidy) (d)	$56.00/acre
Revenue + Indemnity – Premium (c – d)	$699.50/acre

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Biram, Hunter, Andrew M. McKenzie, and Chanda Bhattrai. “How can crop marketing and crop insurance go together?” Southern Ag Today 5(24.3). June 11, 2025. Permalink

Over the past 10 years the monthly average December corn futures contract price has peaked in June and declined through harvest (Figure 1). However, prices react differently each year. This article examines the December corn futures contract monthly average price from 2010 to 2024, for years when national average corn yield is above the predicted trendline (2014, 2015, 2016, 2017, 2018, 2021, and 2024) and below the predicted trendline (2010, 2011, 2012, 2013, 2019, 2020, 2022, and 2023). In years when the national average yield is above the trendline, the monthly average December corn futures price peaks in May and declines to September, before recovering at the end of the year. This trend can also be seen in 2024 (blue bars; Figure 1). In years when the national average yield was lower than trendline, average monthly December futures prices increased from May to October. May and June have historically been the months when December futures prices begin to move higher or lower. This is largely due to three factors: 1) confirmation of planted acreage (USDA June Planted Acreage report); 2) early season weather and crop conditions; and 3) increased accuracy for June-July yield forecasts. 

Figure 1. Average Monthly December Corn Futures Price, 2024, 2025, 10-Year Average, Below Trendline and Above Trendline National Average Yield 

Currently, 2025 USDA estimates for national corn acres planted are at 95.3 million acres (March Prospective Plantings report). The USDA will release the Acreage report on June 30^th which will provide revised estimates. Due to beneficial planting conditions throughout a large portion of corn producing regions of the U.S. and a corn-to-soybean ratio that favors corn planting, many analysts are anticipating an increase in corn acres compared to current USDA estimates. 

Weather has also been mostly favorable across the corn belt. On May 27^th, the USDA estimated that 5% of corn production was in severe drought or worse, indicating most of the major production areas had average to favorable soil moisture conditions. This can change rapidly and in the recent past many states have experienced flash droughts that have reduced state level yield estimates later in the growing season. The May 31^st 30-day NOAA precipitation forecast indicates average to above average precipitation for the corn belt, the Mississippi river portal and the southern seaboard. 

Farmers concerned with downside futures price risk could consider purchasing a December put option at or out of the money to provide short term price protection. If futures prices move lower the put would provide a futures price floor. If futures prices start to trend higher, the put option could be sold and part of the put option premium recovered. Managing the downside futures price risk at key times in the production year can assist in removing risk and protecting against financial losses.     

References and Resources:

Barchart.com. December Corn Futures Price. https://www.barchart.com/futures/quotes/ZCZ25/overview.

NOAA Climate Prediction Center. 30-Day Forecast. https://www.cpc.ncep.noaa.gov/products/predictions/30day/.

USDA Ag in Drought. https://www.usda.gov/sites/default/files/documents/AgInDrought.pdf.

USDA Prospective Planting Report. https://usda.library.cornell.edu/concern/publications/x633f100h.

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Smith, Aaron. “Seasonal Movements of the Monthly December Corn Futures Price.” Southern Ag Today 5(23.3). June 4, 2025. Permalink

On May 12, 2025, the USDA released its World Agricultural Supply and Demand Estimates (2025) report which provides the first 2025/26 fiscal year (FY) estimate of United States sugar production. United States domestic sugar production, which consists of sugar extracted from both sugarbeets and sugarcane, is estimated at 9.285 million short tons raw value (STRV) for the 2025/26 FY (USDA WASDE, 2025). Domestic beet sugar production is estimated at 5.180 million STRV, or 56% of total domestic production, and domestic cane sugar production is estimated at 4.105 million STRV, or 44% of total domestic production (Figure 1). 

Total domestic use of sugar is predicted to be 12.355 million STRV which includes estimated domestic sugar production of 9.285 million STRV, U.S. sugar imports of 2.475 million STRV, and net stocks usage (beginning stocks minus ending stocks) of 0.596 million STRV (USDA WASDE, 2025). Thus, net stocks usage plus domestic sugar production is estimated to account for about 80% of the domestic use of sugar.  

The estimated FY 2025/26 domestic sugar production (9.285 million STRV) represents a 26,000 STRV reduction from last year’s total domestic production of 9.311 million STRV (Figure 1). The 2025/26 FY has an estimated slight increase in cane sugar production that is offset by a decrease in beet sugar production, ultimately resulting in the slight year-over-year decrease in overall domestic sugar production. 

Beet sugar production is estimated at 5.180 million STRV, a 154,000 STRV decrease (2.9%) from the year prior. Sugarbeets are produced in the Upper Midwest, Great Lakes, Great Plains, and Far West regions of the country. United States estimated 2025/26 FY sugarbeet planted area (1.104 million acres) is based on the USDA National Agricultural Statistics Service (NASS) (2025) March Prospective Plantings report. The estimated harvested area (1.081 million acres) is derived using a 10-year average of harvested-to-planted ratio. The sugarbeet shrink (6.76%) and recovery rate (14.78%) are both projected based on the 10-year national average.

Sugarcane is now produced in only two states- Florida and Louisiana. Cane sugar output is forecast at 4.105 million STRV, up 128,000 STRV (3.2%) from the year prior. Louisiana’s output is projected at 2.088 million STRV, reflecting six consecutive years of increase, and four years of surpassing Florida sugar production. Sugarcane acres in Louisiana have been increasing due to the attractiveness of sugar compared to other alternative crops, availability of custom harvest groups, and acreage expansion northward in the central region of the state. Florida’s cane sugar production is projected at 2.017 million STRV (USDA WASDE, 2025). 

Figure 1. United States sugar production by source, 2016/17 FY through estimated 2025/26 FY.

Like many other agricultural sectors, the sugar sector has faced challenges. Namely, the tightening of operating margins due to rising costs of production (Deliberto and DeLong, 2024a) and flat or falling prices (Deliberto, DeLong, and Fischer, 2024b). This is most evident in the recent closures of sugar processing facilities in several states. Since 2000, roughly 40% of United States sugar mills, refineries, and sugarbeet factories have closed (i.e., 29 closures with 42 remaining open) (American Sugar Alliance, 2025; Louisiana Sugarcane Industry, 2025; Fischer, Outlaw, Raulston, and Herbst, 2022). 

Most recently, there have been three notable closures. In 2023, the Sidney Sugar Company in Montana closed due to falling prices for sugarbeets (Western Ag Network, 2023).  Next in 2024, the Rio Grande Valley Sugar Growers, Incorporated ceased operations (Food Business News, 2024). The facility terminated operations due to Mexico’s failure to comply with the provisions of the 1944 Water Treaty between the U.S. and Mexico that governs water sharing between the two nations on the Colorado River and the Lower Rio Grande. Most recently, it was announced that the last remaining sugarbeet processing facility in California will be decommissioned at the end of this season – the Spreckels Sugar Company, Incorporated in Brawley, California (Southern Minnesota Beet Sugar Cooperative, 2025). 

In recent months, U.S. wholesale prices for beet and cane sugar have been falling (USDA Economic Research Service, 2025). Coupled with the rising costs of producing sugarbeets and sugarcane and processing them into sugar, this has created very tight operating margins for sugar producers (Deliberto and DeLong, 2024a). Looking ahead to the next growing season, farmers are optimistic that a new Farm Bill will strengthen the farm safety net and that growing conditions will be favorable for sugarbeets and sugarcane. 

References

American Sugar Alliance. (2025). Sugar’s Coast-to-Coast Reach. Retrieved from: https://sugaralliance.org/us-sugar/sugars-coast-to-coast-reach. 

Deliberto, M., and K.L. DeLong. (2024a). “Examining Sugarcane and Sugarbeet Production Costs.” Southern Ag Today. Retrieved from: https://southernagtoday.org/2023/12/11/examining-sugarcane-and-sugarbeet-production-costs/.

Deliberto, M., K.L. DeLong, and B. Fischer. (2024b). “Analyzing World and U.S. Sugar Price Dynamics.” https://southernagtoday.org/2024/05/20/analyzing-world-and-u-s-sugar-price-dynamics/.  

Fischer, B.L., J.L. Outlaw, J.M. Raulston, and B.K. Herbst. (2022). “Economic Impact of the U.S. Sugar Industry.” Retrieved from: https://sugaralliance.org/wp-content/uploads/2022/06/Sugar-Report.pdf. 

Food Business News. (2024). Retrieved from: https://www.foodbusinessnews.net/articles/25615-last-sugar-cane-grower-in-texas-to-close.

Louisiana Sugarcane Industry. Production Data 1984-2023. Retrieved from: https://amscl.wpenginepowered.com/wp-content/uploads/2024/11/Production-Data-1984-to-2023.jpg. 

Southern Minnesota Beet Sugar Cooperative. (2025). Southern Minnesota Beet Sugar Cooperative to Decommission Spreckels Sugar Company, Inc. in California. Retrieved from: https://www.smbsc.com/ourstory-2/SMBSCMediaReleaseReSpreckelsSugarCompany2025.04.22.pdf.

USDA Economic Research Service. (2025). World, U.S., and Mexican Sugar and Corn Sweetener Prices. Tables 5 and 5a. Retrieved from: https://www.ers.usda.gov/data-products/sugar-and-sweeteners-yearbook-tables.

USDA National Agricultural Statistics Service (NASS). (2025). Prospective Plantings. Retrieved from: https://usda.library.cornell.edu/concern/publications/x633f100h. 

USDA World Agricultural Supply and Demand Estimates. (2025). Retrieved from: https://www.usda.gov/about-usda/general-information/staff-offices/office-chief-economist/commodity-markets/wasde-report.

Western Ag Network. (2023). “Sydney Sugars to Begin Closure Procedures in April.” Retrieved from: https://westernagnetwork.com/sidney-sugars-to-begin-closure-procedures-in-april. 

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Deliberto, Michael, and Karen L. DeLong. “The 2025 Sugar Market Domestic Supply and Outlook.” Southern Ag Today 5(22.3). May 28, 2025. Permalink

The 2025 trade war between the U.S. and China has been an evolving phenomenon.  The U.S. implemented tariffs on Chinese imports effective February 4, which were then increased March 4.  China responded with a variety of tariffs, including 15% additional tariffs on U.S. raw cotton, effective March 10.  

The above situation continued to change, with the U.S. and China effectively embargoing their mutual trade in April with extreme tariff levels and then adjusting these extreme levels lower in May.  As of May 12, and for 90 days, the Chinese tariff rate on U.S. cotton is 10%.

With all the policy variation, the direct impact on U.S. cotton has probably been lower in the current 24/25 marketing year than it would have been in previous years.  The reason is that 2024/25 has seen an historically low level of U.S. export commitments to China of upland cotton (Figure 1). Thus, there is relatively little volume of U.S. cotton to be directly impacted by the initial, extreme, or current levels of Chinese tariffs.

The remaining tariff risk to cotton demand is more likely an indirect influence.  To the extent that tariffs imposed by the U.S. and its trading partners depress GDP, it follows that demand for semi-durable discretionary textile products could be reduced.  This possibility is suggested in Figure 2, where the percentage change in world GDP appears to move directly with annual per capita cotton consumption.

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Robinson, John. “Scope of Chinese Retaliatory Tariffs on U.S. Cotton Exports.” Southern Ag Today 5(21.3). May 21, 2025. Permalink

The May 2025 World Agricultural Supply and Demand Estimates (WASDE) is a highly anticipated report as it offers the first official USDA estimates of the new crop marketing year (USDA, 2025).  For 2025/2026, the estimates show a divergence of fundamental factors in the U.S. grain markets.   Estimated days of use on hand at the end of the marketing year (a stocks-to-use ratio calculated by dividing ending stocks by average daily use) are projected to increase in 2025/2026 compared to 2024/2025 for corn, wheat, and rice. Conjointly, the season average farm price is projected lower for these three grains. For soybeans, days of use on hand are forecast to decrease and the farm price is forecast to increase compared to last year. 

Based on the Prospective Plantings report back in March, corn acres for 2025 are projected at 95.3 million, up from 90.6 million in 2024. USDA’s yield estimate for 2025 is a record high 181.0 bushels per acre. This combines for a record corn crop of 15.820 billion bushels.  Add in 1.415 billion bushels of beginning stocks and the corn supply in the 2025/2026 marketing year is a record 17.206 billion bushels, up 3.6% from last year.

U.S. corn use is projected at record levels as well with increases in feed and exports.  However, the increase in corn supply exceeds the increase in use, resulting in an increase in ending stocks. Days on hand increased by an 8.6-day supply, and the season average farm price is down from $4.35/bu last year to $4.20/bu. With a PLC reference price in 2025 of $4.26/bu, that would earn a 6-cent-per-bushel payment. 

Soybean acres for 2025 are estimated at 83.5 million, down from 87.1 million in 2024.  But with a record forecast yield of 52.5 bushels per acre, production in 2025 is down only 26 million bushels from 2024.  Soybean use is forecast to increase by 31 million bushels on increased domestic crushings. Ending stocks are expected to decrease by 55 million bushels, and days of use on hand are expected to decline by 4.8 days. The season average farm price is projected to increase by 30 cents per bushel to $10.25.

U.S. wheat production is estimated to be little changed from the 2024 crop with the decrease in acres mostly offset by a higher yield estimate.  Impacting the wheat supply for 2025/2026 is an increase in beginning stocks and a decrease in projected imports (-30 million bushels).  Wheat use is projected lower on a decrease in exports of 20 million bushels. This raises the wheat ending stock estimate by 82 million bushels, increases carryover to a 172-day supply, and lowers the season average farm price from $5.50/bu last year to $5.30/bu. With a $5.56/bu reference price, this would generate a PLC payment of 26 cents per bushel. 

The U.S. rice supply in 2025/2026 is projected higher, as an increase in beginning stocks offsets a small decline in production. Use is up 1 million hundredweight with an increase in domestic use and a decrease in exports.  This leaves ending stocks up 3.5 million hundredweight and days on hand higher by 3.2. The farm price is down $2 per hundredweight to $13.20, below the PLC reference price of $14.00. 

Of course, much can change between these early season estimates and final crop production and use numbers.  Weather, trade policies, the economy, global grain fundamentals, and other factors foreseen and unforeseen, will evolve and emerge to shape grain prices. The May WASDE is an important benchmark to assess and estimate the impact of these changes and forces as the season unfolds. 

Table 1.    May 2025 WASDE Numbers for U.S. Grains (corn, soybeans, and wheat in millions of bushels; rice million hundredweight) and 2025 PLC Reference Prices and Estimated Payment Rate.

Crop	Corn			Soybeans			Wheat			Rice
	mil bu	change*		mil bu	change*		mil bu	change*		mil cwt	change*
Beginning Stocks	1,415		-348	350		+8	841		+145	45.0	+5.2
Production	15,820**		+953	4,340		-26	1,921		-50	219.3	-2.8
Total Supply	17,260**		+605	4,710		-24	2,882		+64	313.5**	+3.5
Total Use	15,460**		+220	4,415		+31	1,959		-18	266.0**	+1.0
Ending Stocks	1,800		+385	295		-55	923		+82	47.5	+2.5
Days on Hand	42.5		+8.6	24.4		-4.8	172.0		+16.7	65.2	+3.2
Price $/bu or $/cwt
Farm Price	$4.20		-$0.15	$10.25		$0.30	$5.30		-$0.20	$13.20	-$2.00
PLC Reference Price	$4.26			$9.26			$5.56			$14.00
PLC payment rate	$0.06			$0.00			$0.26			$0.80

*change 2025/26 marketing year compared 2024/25 marketing year.

**record high

Reference

USDA, Office of the Chief Economist. World Agricultural Supply and Demand Estimates, May 12, 2025. Available online at https://www.usda.gov/about-usda/general-information/staff-offices/office-chief-economist/commodity-markets/wasde-report.

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Welch, J. Mark. “Recap of the May WASDE for U.S. Grains.” Southern Ag Today 5(20.3). May 14, 2025. Permalink