On any given day, farm operators and others can get grain price quotes from the CME Group, also known as the Chicago Board of Trade (CBOT), in “real-time” on their computer or I-phone. Almost as quickly, they can get current and future corn and soybean market price quotes from local grain elevators, ethanol plants, and processing plants. The difference between the local grain price and the CBOT price is known as “basis”. Understanding how basis works and the seasonal trends associated with basis can be an important factor in making corn and soybean marketing decisions.
More specifically, “basis” is the difference between the local grain price quote on a specific date and the CBOT price for the corresponding futures contract month. Local harvest price quotes for corn and soybeans would correspond to the December CBOT corn futures price and the November CBOT soybean futures price. By comparison, storing the corn or soybeans after harvest and selling the grain via a forward contract in June or early July the following Summer would have the basis level determined by the July CBOT corn or soybean futures.
A “narrow” or “tighter” basis means that the local corn or soybean price is nearer or getting closer to the corresponding CBOT price, while a “wide” or “widening” basis reflects local grain prices that have a greater margin below the CBOT prices. In most instances, farmers in the Upper Midwest deal with “negative” basis levels, which means than local corn and soybean prices are lower than the corresponding CBOT prices. Areas near the Mississippi River ports or in the Southern U.S more typically have “positive” basis levels, where local grain prices are actually higher than CBOT prices. However, there have been several areas of the Upper Midwest that had “positive” basis levels for corn and soybeans at certain times from 2021 until 2023.
While the definition of basis may seem quite simple, having a good understanding of basis can be quite complex. Basis can be highly variable at different locations in a region on any given day and can vary throughout the year, or suddenly be adjusted due to changing dynamics in grain market fundamentals. Following are the main factors that affect basis and can lead to changes in basis levels:
· Geographic Variations - Corn and soybean basis can vary greatly from location-to-location, largely dependent on the amount of the local grain production to be used as livestock feed or for use in processing and ethanol production. Therefore, basis levels tend to be wider in Western Minnesota and the Dakota’s than in Southern Minnesota and Iowa, which have a high amount of livestock production, as well as several ethanol plants and soybean processing plants.
· Transportation Costs -This is the cost of shipping grain from the point of local sale to the final destination point, whether it be for use within the U.S. or transported to the ports to be shipped for exports to other countries. For example, areas that utilize a large percentage of the corn and soybean production in the local area have less grain to be transported to the ports or to other portions of the U.S. In addition, being closer to the Mississippi River, an important port, or a major rail line tends to reduce transportation costs and result in tighter basis levels.
· Supply and Demand - The overall U.S. grain supply, based on crop production in a given year and grain carryover levels from the previous year, along with the grain usage for livestock feed, processing, ethanol production, and exports, can result in year-to-year variations in basis levels. For example, the 2021 and 2022 corn and soybean basis levels in many areas were tighter than normal due to the strong demand for exports to China and increased domestic demand for livestock feed and processing. However, with increases in and corn and soybean acreage, along with projected reduced demand and export levels, basis levels widened out to more typical “harvest-time” basis levels by the Fall of 2023. This trend has continued in many areas in 2024. Poor crop yields in a local area can also affect the local basis level in a given year, which could occur following the 2024 harvest season in portions of Southern Minnesota and Iowa.
· Storage and Interest Costs - In a normal year, both CBOT corn and soybean futures prices and cash prices tend to be the lowest at harvest time and then increase by the summer months in the following year. As the time gets closer to the actual date of delivery for the grain, the storage and interest costs typically decrease, and the basis tends to narrow; however, this does not always occur. At any time during the year, depending on local demand, cash grain prices may be relatively strong compared to the CBOT prices, which may result in tighter basis levels. This was the case in 2021 and 2022, when a combination of lower-than-average crop yields, together with strong demand for corn and soybeans, kept basis levels fairly tight throughout the year in many portions of the Upper Midwest. However, this scenario has been much different in the second half of 2023 and for most of 2024 when the U.S. has had larger production levels.
There are many grain marketing tools available for farm operators to utilize in addition to cash sales, including a variety of hedging, options, and basis contracts. Generally, a hedging or options contract locks in the CBOT futures price, but not the cash price, meaning that the farmer still has basis risk. For example, a “hedge-to-arrive” contract locks in a CBOT futures price but does not finalize the basis until the futures contract is cleared and the grain is actually sold at the local level. By comparison, a “basis contract” locks in the basis but keeps the final price open depending on changes in the corresponding CBOT futures price at the time of delivery or setting the final price.
The current 2024 basis levels for corn and soybeans in Southern Minnesota have been more typical of “harvest-time” basis levels that existed prior to 2021 and 2022. Recent harvest-time corn basis levels in the Upper Midwest ranged from about $.20 to $.50 per bushel under the CBOT December corn futures price. Soybean basis levels ranged from about $.40 to $.80 per bushel under the CBOT price, with tighter basis levels at soybean processing plants. As mentioned earlier, since the last half of 2023, harvest basis levels for corn and soybeans in the Upper Midwest have resembled the more typical of basis levels that existed from 2015-2020 than the basis levels from 2021 to early 2023. During 2015-2020, the local corn basis level in Southern Minnesota improved in three years and widened in three years by the following June. Soybean basis levels improved in five of the six years during those years, with an average improvement of less than $.10 per bushel.
The return to wider “harvest-time” basis levels for corn and soybeans during harvest season in the past couple of years is certainly something to factor into post-harvest grain marketing decisions in the next few months. If corn and soybean futures prices rally after harvest season and basis levels remain quite wide, it will likely encourage the use of more “hedge-to-arrive” contracts for the summer months of 2025. This will allow producers to reduce their “price risk” on the stored grain, while still being able to take advantage of potential basis improvement that may occur between the post-harvest months and the Summer of 2025. On the other hand, if localized basis levels tighten for a short-term period of time after harvest due to reduced 2024 crop yields and strong local demand, it may be a time to use a “basis contract” to lock-in the basis level. This will allow a producer to take advantage of the tighter basis levels and still have some upside potential in the corn or soybean market into next Spring.
Most grain marketing strategies, including storing unpriced grain in a bin on the farm, involve some level of price and/or basis risk. Understanding the dynamics of basis in corn and soybean market prices is a key element in analyzing the various types of grain marketing contracts that are available to farm operators. Many grain marketing advisors do a very good job of explaining the dynamics of basis and how that interacts with grain marketing strategies. Iowa State University has some good information available on understanding basis and explaining various grain marketing strategies. This information is available on the “Ag Decision Maker” website at: https://www.extension.iastate.edu/agdm/cdmarkets.html.
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions Phone - (507) 381-7960; E-mail - [email protected]

It is likely that a significant number of corn and soybean producers in many areas of the Upper Midwest may qualify for crop insurance indemnity payments in 2024. Several portions of the region dealt with excessive rainfall during June that caused flooded fields, considerable drown-out damage to crops, and generally poor growing conditions for corn and soybeans early in the growing season. There were also numerous severe storms in some locations throughout the summer months that also resulted in some crop damage later in the growing season. These weather issues will likely result in yield reductions on numerous farms across the region, which together with the price declines from the crop insurance base prices on March 1, increases the likelihood of 2024 crop insurance indemnity payments for many producers.
 
With Federal Crop Insurance, every year is different, and with the multiple options available to producers, there are many variable results from crop insurance coverage at harvest time. The 2024 crop year will be no different, with some producers choosing Yield Protection (YP) policies (yield only) versus Revenue Protection (RP) policies (yield and price), and producers having different levels of coverage on various crops. Producers also vary on having “optional units” versus “enterprise units” for their crop insurance coverage. In addition, some producers also have enhanced insurance coverage through private insurance companies, or through the “Supplemental Crop Option” (SCO) and Enhanced Coverage Option (ECO) policies that were available in 2024.
 
In the Midwest, most corn and soybean producers in recent years have tended to secure some level of revenue (RP) crop insurance coverage, rather than standard yield-only (YP) policies. Farm operators like the flexibility of the RP policies that provide insurance coverage for reduced yields, as well as in instances where the harvest price drops below initial base price. In 2024, crop insurance loss calculations for corn and soybeans with RP policies will likely function similarly due to the Chicago Board of Trade (CBOT) harvest price for corn and soybeans being below the 2024 crop insurance base prices, which were finalized on March 1.
 
The established base prices for 2024 YP and RP crop insurance policies were $4.66 per bushel for corn and $11.55 per bushel for soybeans. These base prices will be the payment rate for 2024 YP policies for corn and soybeans. These base prices will also likely serve as the final price to calculate revenue guarantees for determining potential RP crop insurance indemnity payments for corn and soybeans.
 
The final harvest price for RP policies with harvest price protection is based on the average CBOT December corn futures and CBOT November soybean futures during the month of October, with prices finalized on November 1, 2024. If the final harvest CBOT price for December corn futures or November soybean futures is higher than the established base prices, the harvest price would then be used to determine the RP insurance guarantees, which is not likely for either corn or soybeans in 2024. The harvest price is also used to calculate the value of the actual harvested bushels for all RP insurance policies. As of September 6, the crop insurance CBOT harvest price estimates were just over $4.00 per bushel for corn and just over $10.00 per bushel for soybeans.
 
Corn and soybean producers had the option of selecting crop insurance policies ranging from 60% to 85% coverage levels. The level of insurance coverage can result in some producers receiving crop insurance indemnity payments, while other producers receive no indemnity payments, even though both producers had the same adjusted APH yield and the same final yield. For example, at an adjusted APH corn yield of 200 bushels per acre, a producer with 85% RP coverage would have a yield guarantee of 170 bushel per acre, and a revenue guarantee of $792 per acre, while a producer with 75% coverage would have a yield guarantee of 150 bushels per acre, and a guarantee of $699 per acre. If the actual 2024 yield was 170 bushels per acre, with a $4.00 per bushel harvest price, the producer with 85% coverage would receive a gross indemnity payment of $112 per acre, while the producer with 75% coverage would receive an indemnity payment $19 per acre.
 
The likelihood of a lower crop insurance harvest price, based on the average CBOT December corn futures price during October, greatly increases the likelihood of crop insurance indemnity payments for Upper Midwest corn producers that have 80% and 85% RP insurance policies for 2024. Based on the current CBOT December corn price projection (near $4.00/bu.), indemnity payments for corn could begin at final yields that are very near the 2024 APH yields for farmers with 85% RP insurance policies. For example, with an 85% RP policy on corn with a 200 bushel per acre APH yield and a $4.00 per bushel harvest price, 2024 crop insurance indemnity payments would begin at a yield below 198 bushels per acre (very near the APH yield). If the harvest price increases to $4.30 per bushel, the payments would begin at a yield below 184 bushels per acre (92 percent of APH yield).
 
The situation for soybeans will likely be very similar to corn at current CBOT November soybean price estimates, with indemnity payments being initiated very close to APH yields with 85% RP insurance coverage. Based on current soybean harvest price estimate (near $10.00/bu.) and an APH yield of 60 bushels per acre, crop insurance indemnity payments would begin at just below 59 bushels per acre. However, there has been some strength in the soybean price in the past few weeks. If the average November futures price in October increases to $10.75 per bushel, the payments would begin at 55 bushels per acre (92% of APH yield).
 
A majority of Midwest corn and soybean producers utilize “enterprise units” for their crop insurance coverage, which combines all acres of a crop in a given county into one crop insurance unit. By comparison, “optional units” allow producers to insure crops separately in each township section. Premium rates are somewhat higher with optional units. Enterprise units work quite well with RP policies to protect against price drops during the growing season, and when a producer has most of their land in the same general area. Optional units are preferable when a producer has a variety of land that is spread across a wide area in a county, or when producers have individual farms that are highly susceptible to natural disasters, such as flooding, drought, etc.
 
For example …… assume that producers A and B both have 5 separate farms in the same county with an APH corn yield of 200 bushels per acre, and that the overall average 2024 corn yield on all farms was 186 bushels per acre. However, two of the farms were 210 bushels per acre each, and the other three farms were 170 bushels per acre each. Also assume a final corn harvest price of $4.30 per bushel. Producer A has an 85% RP policy with optional units and producer B has an 85% RP policy with enterprise units. Producer A, with the optional units, would receive no insurance payment on the two farms with the higher yield; however, he would receive an indemnity payment of $61 per acre on the three farms with the lower yield. Producer B, with the enterprise units, would receive no insurance payments on any farms, since that would be based on the overall average yield.
 
Producers that have crop revenue losses in 2024, which could result in potential crop insurance indemnity payments, should properly document the yield losses, regardless of their type or level of insurance coverage. A reputable crop insurance agent is the best source of information to make estimates for potential 2024 crop insurance indemnity payments, and to find out about documentation requirements for crop insurance losses. It is important for producers who are facing crop losses in 2024 to understand their crop insurance coverage and the calculations used to determine crop insurance indemnity payments.
 
Kent Thiesse has prepared an Information Sheet titled “2024 Crop Insurance Payment Potential”, which is available by contacting: [email protected].  The University of Illinois FarmDoc web site also contains some good crop insurance information and spreadsheets to estimate crop insurance payments. The FarmDoc web site is located at:  https://farmdoc.illinois.edu/crop-insurance
 
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions
Phone - (507) 381-7960; E-mail - [email protected]
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​As we enter the final months of 2024, some farmers in the Upper Midwest could be facing serious financial challenges by the end of the year. Harvest prices for the 2024 corn and soybean crop are at the lowest level in the past five years, which are below break-even price levels for a majority of farm operators. In addition, some crop producers in many portions of Southern Minnesota, Northwest Iowa, and Southeast South Dakota could be dealing with the “perfect storm” financially, due to reduced crop yields in 2024 resulting from late planting, excessive rainfall, and flooded fields. On the other hand, several of the primary corn and soybean production areas are anticipating above average crop yields in 2024, which will likely keep market prices at depressed levels through the harvest season. The combination of reduced crop yields, low commodity prices, and continued high input costs, could spell financial disaster for some Midwest cop producers.  
Most crop input expenses were higher in 2024 compared to expense levels in 2023 and other recent years. Input costs have increased for seed, crop chemicals, repairs, custom work, and labor. Interest expense, machinery depreciation and other overhead costs have also increased in 2024 compared to recent years. The one exception is fertilizer expense, which declined 15-20 percent from the record-high U.S. fertilizer prices in 2022 and 2023. In most areas, land rental costs are also 10-25 percent higher than a few years ago. Now crop producers are facing the prospects of much lower commodity prices, along with reduced crop yields in some areas due to weather challenges, will likely result in some of the lowest profit margins in the past decade.
Following three years in a row of strong profit levels (2020-2022) for crop production in the Upper Midwest, there were already signs in 2023 that pointed to more challenging farm profit scenarios in the future. USDA is projecting total U.S. net farm income to decline by over 25 percent in 2024, as compared to 2023 net farm income levels. This followed a decline of 16 percent in U.S. net farm income from 2022 to 2023. If the USDA projection holds true or gets worse for 2024, it would represent the largest two-year (2022-2024) decline in history for U.S. net farm income. USDA is also estimating net cash income on U.S. farms in 2024 to decline by over $92 million from net cash income levels two years ago in 2022. If the estimated 2024 U.S. cash farm income of $121.7 billion comes to reality, it would be similar to the 2016 net cash income level and would be one of the lowest levels in the past two decades.
 
Earlier this year, the University of Minnesota reported that the median net farm income for Southern Minnesota farmers in 2023 was only $40,000, which was over four times lower than a year earlier. This followed two of the highest average median net farm income levels ever recorded, which were $177,614 in 2022 and $176,426 in 2021. The very solid net farm income levels from 2020-2022 followed seven years (2013-2019) in a row of sup-par net farm income levels in the region. It now appears that we could be returning to the very low farm income levels and negative profit margins that existed for many farm operators from 2013 to 2019.
 
An analysis of actual data from the SCC Farm Business Management program and the University of Minnesota FINBIN program by Kent Thiesse, Farm Management Analyst, shows some interesting trends on profitability levels for corn production in recent years. The analysis focused on cash rented corn acres in southern Minnesota (2014-2023). The analysis takes the average corn direct input costs, cash rent costs, and overhead expenses and divides those expenses by the average corn selling price for the year to arrive at how many bushels of corn it took to cover the various expenses, as well as the bushels need to cover all expenses. The net return over all costs would be the farm operator’s “net return to labor and management”. The analysis did not include crop insurance or government farm program payment income into the “bushels needed” calculations; however, that payment income is included in the “net return over all costs” figure.
 
 
Based on the FBM data, there was a negative “net return” over all expenses for corn production each year from 2013-2018, with less bushels produced than were needed to cover all crop expenses in some years. From 2020 to 2022, corn producers benefitted from favorable corn yields and strong commodity prices, together with manageable expenses, to achieve some very solid profit levels. A combination of higher input expenses and lower corn market prices in 2023 showed that an average of 208 bushels per acre were needed to cover all costs on cash rented land. The actual average corn yield in 2023 was 203 bushels, marking that the first year since 2019 with less bushels produced than were needed to cover costs. Based on the data, there was a small average profit margin of $39 per acre in 2023 on cash rented corn acres, primarily due to favorable crop insurance indemnity payments. 
 
An analysis of estimates for the 2024 crop year, which were updated on August 1, shows signs that the profit situation for corn production could be considerably worse once all the 2024 data is collected. As of August 1, USDA is projected a national market year average (MYA) corn price of $4.20 per bushel. Based average crop input cost estimates for 2024, and average cash rental rate of $275 per acre, and the USDA MYA corn price of $4.20 per bushel, it will take an estimated corn production level of 244 bushels per acre to cover all expenses. This increases to 269 bushels per acre at a corn price of $3.80 per bushel, which was close to the farm-level price bids for harvest delivery at many locations in southern Minnesota in late August. These corn yields will not be realistic for most farmers in southern Minnesota in 2024. By comparison, it took only 154 bushels of corn in 2022 and 149 bushels in 2021 to cover all expenses.
 
Obviously, there is a wide variation in breakeven costs among farm operators in a given year, depending on final average yield and the market price received, as well as the variation in crop input costs and land expense. Just as it did a year ago in 2023, crop insurance indemnity payments will likely play a big role in final profit levels from corn production in 2024. There is also considerable variation in the type of crop insurance coverage that farmers carry, which will impact final payments. Based on current market price estimates, it is not likely that crop insurance payments will totally make up for the likely negative profit margins in 2024 in most instances.
 
The combination of higher crop input costs and land rental rates is likely to put more pressure on crop breakeven prices for 2024. Using typical crop input expenses and average overhead costs, together with a land rental rate of $275 per acre and a targeted return to the farm operator of $50 per acre, the breakeven price to cover those expenses for corn in 2024 for most farmers will likely be around $5.00-$5.50 per bushel at average yield levels. If the cash rental rate increases to $350 per acre, or for farmers with reduced corn yields in 2024, the breakeven price is likely to jump to near $6.00 per bushel. The estimated 2024 breakeven soybean price for most producers to cover the cost of production in will likely be in the $12.00 to $13.00 per bushel range at average yields. 
Based on the monthly World Supply and Demand (WASDE) Report in August, USDA is estimating the U.S. average corn price for the 2024-25 marketing year (2024 crop) at $4.20 per bushel and the average 2024-25 soybean price at $10.80 per bushel. Local cash price bids for corn in early August at grain elevators and ethanol plants in Southern Minnesota were near $3.60-$3.80 per bushel. Local cash price bids for soybeans were near $9.40-$9.60 per bushel, with slightly higher bids at soybean processing plants. A year ago, late August prices for harvest delivery were $4.80 per bushel for corn and $13.50 per bushel for soybeans.
 
If the lower corn and soybean prices continue into 2025, this may become an even bigger financial concern going forward. While fertilizer costs have modified a bit in the past year, input costs for seed, chemicals, fuel, repairs, and labor have continued at higher levels. In addition, short-term interest rates on farm operating lines of credit have remained high, and credit needs will likely increase to finance the 2025 crop inputs. If corn and soybean grain futures prices for the Fall of 2025 stay low in early 2025, crop insurance guarantees for the 2025 crop year will be much lower than in 2024. This will increase the financial risk for many farmers going forward, and will likely result in increased concern by ag lenders that provide capital for crop production.
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions
Phone - (507) 381-7960; E-mail - [email protected]