Crop Prices and Agri Markets

How crop prices are set

For the big traded crops, the starting point is a futures market. Corn, soybeans and wheat trade on CME Group exchanges in Chicago and Kansas City; cotton, sugar, coffee and cocoa trade on ICE. Futures prices reflect what traders around the world expect supply and demand to be, so a drought in Brazil or a big US planting report moves them within minutes.

The price a farmer is actually offered at the local elevator or buyer is the cash price, which equals the futures price plus or minus the basis. Basis covers transport to the end user, local supply and demand, storage costs and quality, and it varies by location and season. A farm can see strong futures and still get a weak cash price if local bins are full at harvest. Crops without futures markets, such as most fruit and vegetables, are priced in wholesale and contract markets where weather and perishability play a bigger part. Our article on why crop prices have fallen for US farmers shows these forces at work.

Where to find reliable market data

A few public sources move markets and are worth knowing by name:

• USDA’s monthly World Agricultural Supply and Demand Estimates (WASDE) report, the reference for US and world balance sheets of major crops.
• USDA NASS reports on crop progress, planted acreage and stocks, released on a fixed calendar.
• The FAO Food Price Index, a monthly measure of international prices for cereals, vegetable oils, dairy, meat and sugar.
• The AMIS Market Monitor, which tracks wheat, maize, rice and soybeans for the G20.

The number traders watch most closely in a WASDE report is ending stocks, often expressed as a stocks-to-use ratio: how much grain is expected to be left at the end of the season compared with how much is used in a year. A falling ratio means a tighter market and usually firmer prices; a rising one means the opposite.

Prices change daily, so we don’t quote them in these guides. When you read a price anywhere, check the date, the unit, the location and whether it’s a futures, cash or retail figure; most confusion comes from mixing them.

Input costs, rents and margins

The other half of a farm’s margin is costs. Fertilizer is often the largest variable cost for grain crops. Nitrogen prices follow natural gas, the main feedstock for ammonia, while potash and phosphate come from a small number of producing countries, so trade disputes and sanctions move them quickly. Our article on what drives potash prices explains the supply side.

Machinery, fuel, seed, labor and land make up most of the rest. A simple way to bring both halves together is a breakeven price: total cost per acre divided by expected yield per acre. If the market offers less than that, every bushel sold loses money, which is useful to know before signing a forward contract. Equipment prices are covered in pieces such as what a new John Deere combine costs. For land, cash rents are usually set per acre for a season and reviewed against yields and crop prices; USDA publishes average cash rents by state each year. USDA’s Economic Research Service publishes farm income and cost data for the US as a whole.

How farms market their crops

Grain farms choose among a few ways to sell, often combining them. Selling for cash at harvest is simplest but usually meets the weakest basis. Storing on farm or in a commercial facility gives time for prices to improve, at a storage cost. Forward contracts fix a price or basis with a buyer for future delivery. Futures and options let a farm hedge price risk without changing who it sells to, and they need a broker and margin money. This page describes how these tools work; it isn’t advice on which to use.

Crop insurance often works alongside these tools. In the US, revenue protection policies cover a fall in yield, price or both, using futures prices to set the guarantee, which is why many farms decide how much to forward-sell only after choosing their insurance coverage.

Farms that sell direct to consumers face different costs: packaging, transport, market fees, time and advertising. For them, agricultural marketing is about finding buyers and building a brand, and our articles on digital marketing for agriculture businesses and how crops get from farm to buyer cover the options.

Using yield estimates in sales plans

Most marketing plans start with an estimate of how much you’ll have to sell. Forward-selling more than you harvest is a costly mistake, and selling too little leaves you exposed to price falls. Our satellite crop monitoring gives a yield estimate and expected harvest date for each field, updated through the season as the crop develops, which helps with decisions on contracting, storage and trucking. We don’t provide crop prices or trading advice.