Incrementally Pricing Corn into a Futures Market Rally

By Aaron Smith

Tariff escalation remains a major source of uncertainty that could substantially move corn futures markets in the coming weeks/months. Managing some futures price risk based on the current rally is worth considering given the uncertainty in corn markets. On Friday April 11, December corn futures broke through a key resistance point at $4.60/bu.

For those farmers that have not started pricing the 2025 crop, December corn futures above $4.50/bu represent a good starting point to remove some futures price risk (basis could be secured now or left to be fixed at an alternative date depending on local basis offerings). Pricing into a futures market rally, through incremental sales, is a strategy worth considering, and one that will take some of the emotion out of marketing decisions. For example, starting at a December futures price of $4.50/bu, consider pricing 5% of projected 2025 production. For each additional 10-cent increase in futures price, consider establishing a futures price on an additional 5% of estimated production up to a maximum of 35% of projected 2025 production.

Pricing more than 35% of the crop before June can be risky and can result in exchanging price risk for production risk or having limited production to price should a bullish weather market occur in June/July/August. The maximum amount to be priced before June can be a personal preference based on the farmers’ risk tolerance, variability in yield for the farm, and access to storage.  

This incremental pricing strategy would establish an average futures price of $4.80/bu on 35% of projected production if the December corn futures price rallied to $5.10/bu (Figure 1). However, it would also put some sales (10% of estimated production at an average price of $4.55/bu as of April 22) on the books if the current rally stalled or reversed. Futures prices above $4.50 plus a positive basis, which occurs in most Southern states, will result in cash prices of nearly $5.00.