With summer heat pushing crops to maturity, growers have plenty to do as they gear up for harvest. But before turning combines toward the fields, take a beat to consider pricing next year’s corn and soybeans. Depending on basis, 2027 crop futures could be profitable, especially for corn.
Locking in prices a year before harvest carries plenty of risk. Production costs are as uncertain as weather forecasts. Demand is another big question mark. And FOMO (fear of missing out) is valid: What happens if the market takes off after sales are put on the books?
Still, the foggy outlook for potential profits is starting to lift. Updated income forecasts put out by USDA on June 3 suggest farmers could ride into 2027 on the back of the third-best returns on record — $158.4 billion. That provides a strong buffer for both wait-and-see and take-the-money-and-run strategies. Here are risks and rewards for each.
Money ain’t cheap
Life doesn’t have to be fair. Starting from scratch takes plenty of scratch — and the cost of financing 2027 production looks ready to rise 2% to 3%. Some of that increase should come from higher interest rates, as the Federal Reserve debates monetary policy Sept. 15-16. Odds the central bank will hike its benchmark short-term rate by one-quarter of 1% rose on the heels of what appeared to be a hawkish shift from Chairman Keven Warsh’s speech at the Federal Reserve Jackson Hole Economic Symposium at the end of August.
That would lift the bank’s target for Federal Funds rate to a range of 3.75% to 4%, with another hike possible by the start of 2027, as money costs rise to 4.5% or more in the next year. Interest-rate math affects not only next year’s crops, but also the risk of storage decisions on 2026 production, because loans must be extended if grain is not sold to pay off debt.
For all the angst on Wall Street, the Treasury Yield Curve showing rates for different maturities is actually looking healthy. Yes, rates overall are higher than a year ago, and repayment costs more for loans lasting longer. But in the bond market, that’s a normal outlook.
Two years ago, the curve was “inverted” — that is, rates for short-term loans were higher than those for, say, a 30-year mortgage, as the Fed battled inflation with a tighter-money policy. Thanks to wars in Ukraine and the Middle East, inflation remains a priority, and a battle the Fed may be ready to fight with higher rates.
A strong jobs report showing much better-than-expected August payroll growth could give the Fed leverage to boost rates now, without fear of hurting its dual mandates from Congress: stable prices and solid employment.
Production costs are stubborn
Not all the news on the expense side of the ledger is worrisome. Operating, or so-called variable costs, rose sharply for 2026 crops, up 5.3% for soybeans and 7.7% for corn, according to USDA. But the lion’s share of those tallies came from fertilizer, where bills were around 17% higher. The price tag for N-P-K on an acre of Illinois corn is already down 1% from spring highs, and costs normally are most attractive after buying ahead of fall applications subsides toward the end of the calendar year.
Growers could also catch a break, relatively speaking, on fuel to plant, grow, harvest, dry and transport crops. Any tally for diesel, gasoline or propane will largely depend on what happens to tankers moving out of the Persian Gulf through the Strait of Hormuz and the whims of mercurial Russian President Vladimir Putin.
But energy markets are trying to normalize after months of teetering on the brink. Farm-gate diesel stopped short of highs from the 2022 inflation spike, though fuel delivered to Midwest locations still costs close to $5 a gallon.
El Niño rides again
The final piece of the price puzzle is familiar to farmers: the El Niño cycle describing ocean temperatures and air currents in the equatorial Pacific. The warm phase of ENSO is already well underway, and forecasters believe it could reach record strength over the winter. That doesn’t necessarily mean doom and gloom for Midwest crops, but it does ratchet risk higher: Both favorable and unfavorable impacts are more unpredictable.
For example, in the Southern Hemisphere, Australian feed grains and wheat tend to wilt in the face of El Niño onslaught, but fields in Argentina may benefit. To the north, U.S. corn and soybeans generally enjoy higher yields, though gains are anything but a done deal. Transition years are difficult to forecast one way or the other.
Two trends are clear, however: World food prices, as measured by a United Nations index, tend to go down during El Niño events, and rise when its La Niña twin, or cooling phase, takes over. Those tendencies also intensified over the past two decades.
