Farmers Weigh Locking in 2027 Crop Prices Amidst Uncertainty

Farmers are considering locking in prices for their 2027 corn and soybean crops, but this comes with plenty of risks. According to Bryce Knorr, a contributing market analyst at Farm Futures, production costs, demand, and weather forecasts are all uncertain factors that could impact profits.

The USDA's updated income forecast suggests farmers could see the third-best returns on record - $158.4 billion - but this also means higher interest rates and increased borrowing costs. The Federal Reserve is set to meet in September and may hike its benchmark short-term rate, which would lift the bank's target for Federal Funds rate to 3.75% to 4%, with another potential hike possible by early 2027.

The Treasury Yield Curve is showing rates for different maturities are looking healthy, but production costs for farmers are still a concern. Operating or variable costs rose sharply for 2026 crops, up 5.3% for soybeans and 7.7% for corn, due in part to higher fertilizer prices.

The El Niño cycle is also affecting crop yields, with forecasters predicting it could reach record strength over the winter. While this doesn't necessarily mean doom and gloom for Midwest crops, it does increase risk. World food prices tend to go down during El Niño events, but rise when its La Niña twin takes over.