The Fed Cut and Corn Prices

A few days ago, we posted an article about our expectations for the October average settlement price of December 2020 corn futures. That average impacts most corn producers who use revenue protection crop insurance plans. It makes sense then that having an idea of how likely that average is to fall in various price ranges could be useful information when making marketing decisions.

We use a computer model we built to derive this information from many factors, including interest rates as well as the prices of various futures and options on the Chicago Board of Trade. Given today's surprise rate cut by the Federal Reserve, we thought it would be interesting to see how that change, combined with a $0.075/bushel rally in December 2020 futures since we last published our chart, changed the odds going forward. So, without further ado, here is the latest version:

If you look closely, some things have changed. We added the $6.50-$6.75 range. The individual probabilities have all changed as well. One can see a general shift toward higher prices. This shift makes sense in light of the rally we've seen in corn prices since Friday and the lowered short-term interest rates. Perhaps a side-by-side comparison can illustrate this best:

We hope you find this information interesting and useful. We plan to publish it regularly, so be sure to let us know if you have any questions or comments. We love to talk about marketing and risk management. We're here to help keep farmers in business and farms in the family for generations - education is just one way we can help.