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By Gary Schnitkey, Krista Swanson, Nick Paulson, and Jim Baltz, Department of Agricultural and Consumer Economics, University of Illinois and Carl Zulauf, Department of Agricultural, Environmental and Development Economics, Ohio State University

Current futures prices signal relatively high prices for corn and soybeans in the fall of 2023. Relatively high prices are needed to have profitability given significant increases in costs for 2023 (farmdoc daily, August 2, 2022). Any price declines could result in negative profit margins, particularly until projected prices for crop insurance products are set in February based on settlement prices of the November (soybeans) and December (corn) 2023 Chicago Mercantile Exchange (CME) futures contracts. Once projected prices are set, a floor under revenue can be established using revenue insurance. Herein, we look at possible price changes based on history. Historical changes in prices suggest a 10% chance of having a projected price below $5.65 for corn and a 24% chance of a projected price below $13 for soybeans


Our analysis for corn is based on prices of the December CME futures contract; the same contract used to set the projected price and harvest price for crop insurance purposes. As shown in Figure 1, three sets of prices are used:

October price is the average of the settlement prices during October of the year before the contract expires. For example, the October bar for 2002 in Figure 1 is the average of the December 2002 CME contract during October 2001. Futures markets for grains are largely efficient, meaning that the current price of the December 2023 contract is an excellent indicator of the price in December near the contract's expiration. For example, during the first week of October, the December 2023 contract is trading at $6.15 per bushel. Based on this price, an expectation of $6.15 for the 2023 projected price is reasonable. If the period between now and February 2023 could be repeated many times, the average 2023 projected prices would be near $6.15. Of course, as illustrated below, the actual price can vary from this projection in any year.

Projected price is the average of the settlement prices of the December contract during February. This price is used for setting guarantees for Revenue Protection (RP), RP with harvest price exclusion, Area Risk Protection (ARP), and ARP with harvest price exclusion. It also determines payments on yield losses from Yield Protection (YP) and Area Yield Plan (AYP). Supplemental area plans- Supplemental Coverage Option (SCO) and Enhanced Coverage Option (ECO) - also use the February price. For 2022, the projected price is $5.90 per bushel.

Harvest price is the average of the settlement prices of the December contract during the month of October of the year the contract expires. The harvest price is used to determine insurance guarantees.

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