Forward Contracting Key to Farm Survival

Experts Say June and July are Best Times to Lock Crop Prices

Farmers facing declining commodity prices are being urged to take advantage of forward contracting opportunities before harvest. Extension economists say June and July offer the best chances for stable prices.

Hunter Biram and Ryan Loy, from the University of Arkansas Division of Agriculture, explained that waiting until harvest may leave farmers stuck with the lowest prices of the year. This is especially risky when prices are already near or below break-even.

“While the decline in commodity prices is very concerning, seasonality has tended to favor the price increases in this pre-harvest window,” Biram noted during a podcast. 

Scott Stiles supported this strategy with historical data. Since 2000, early-year futures prices have outperformed harvest prices in 79% of years for corn and 71% for soybeans.

The market tends to respond to global and U.S. planting trends. For instance, Brazil’s large soybean output plays a major role in pricing early in the year. U.S. weather conditions from mid-June to early July can also cause temporary price increases.

However, after mid-July, prices usually fall as the market gains a clearer picture of crop yields. That makes early selling a smarter choice, especially when no current commodity is priced above breakeven.

Loy explained breakeven as the price at which a farmer covers all operating costs but does not make a profit. If the break-even price is $4.10 for corn, that’s the target selling price to avoid loss. 

Farmers are encouraged to use tools like the Extension’s Profit/Loss calculator and seek help from local agents. These resources can guide them in navigating tough seasons and making sound marketing decisions.