While the effort, skill, and resources invested in growing a plentiful crop and managing production risk are substantial, the key to profit lies in successful marketing and managing price risk. Some years may present an easy path to profit, while others may pose a challenge. This chapter aims to characterize the crucial role of marketing and price risk in soybean production, providing foundational knowledge, evaluating current market conditions, and offering specific input cost information for North Carolina.

Crop producers in North Carolina are no strangers to risk. Factors outside the producer’s control, such as weather, can influence the yield and contribute to production risk. Similarly, North Carolina producers do not influence national soybean price levels, making them price-takers and subject to market demand and supply conditions that contribute to price risk. Price risk is the uncertainty surrounding the prices a producer will receive for a commodity after deciding to plant it and harvest it for sale. Expectations about soybean prices in a given year are factored into many planting decisions, including deciding how many soybean acres to plant. Expectations about possible harvesttime prices can be formulated before planting (soybeans in North Carolina are usually planted beginning in May and as late as July). Producers can take account of preplanting future price levels for harvesttime futures prices (the November soybean futures contract is considered the harvest futures contract) and adjust the current harvesttime futures by adding the historical basis usually paid at harvesttime for a particular location. Expectations about postharvest prices can also be formed similarly, when storage for later sale may be in play, by looking at current futures prices of later-maturing futures contracts (such as January, March, and May) and by adding the historical basis usually paid at the period of interest for the delayed sale. After planting, neither growing conditions determined by the weather nor market demand and supply conditions, which factor into prices, are predictable, meaning uncertainty exists about the amount of soybeans a producer will have available to sell and at what prevailing price. The quantity produced and the price received affect producer profits, for better or worse.

Profit for a crop is the total revenue received, less the total costs of growing the crop, which is shown as:

\( \mathit{profit}=\mathit{total\ revenue}-\mathit{total\ costs}\)

This section on marketing focuses on the total revenue part of the equation. To keep things simple and to focus just on soybeans (most farms produce several crops), our total profit is equal to the revenue that will come from collecting sales of all the soybeans a farm produces minus the total costs to produce the soybeans, which can be expressed as:

\(\mathit{profit}=\left[\left(price_{soy}\times yield_{soy}\times acres_{soy}\right)+\right]-{total\ costs}_{soy}\)

Soybean revenue is a function (a product of two random variables) of price and yield, which means that revenue itself is a random variable. Revenue will not be determined until both price and yield are known. Only yield is known at harvest. Price will be known at time of actual sale.

\(\underbrace{\mathit{price_{soy}}}_{\mathit{unknown}} \times \underbrace{\mathit{yield_{soy}}}_{\mathit{unknown}} \times \mathit{acres_{soy}}\)

Given that producers must make acreage and crop input decisions before knowing prices and yields, what are the options for dealing with these unknowns and uncertainties?

Addressing yields first, for example, by following best management practices developed by crop scientists and entomologists, can make soybean yields more predictable and reduce the likelihood of crop failure. Among financial tools, crop insurance is also an option. Crop insurance can offer yield protection or revenue protection. The main advantages of crop insurance are that it protects against catastrophic losses and can improve producer access to credit by insuring between 50% and 85% of a farm's approved production history (APH) or revenue (the farm APH is multiplied by the base price), in 5% increments. The disadvantage is that a premium must be paid, though crop insurance premiums are subsidized by the Federal Crop Insurance Corporation (FCIC), so farmers do not pay the full cost. This premium adds to total costs, so selecting the type and level of coverage can be complex. NC State's Department of Agriculture and Resources Economics (ARE) website provides resources on crop insurance.

This section is devoted to marketing and the financial tools to manage price risk. As with yields, we ask similar questions:

• Is there anything we can do to make soybean prices more predictable?

• How can we reduce the financial impact of low soybean prices?

As with crop management practices, determining the “best” practices will depend on various farm characteristics—managing price risk is specific to each farm. When choosing a price-risk management strategy, it is essential to consider your risk tolerance and capacity and the national and local market conditions that impact prices.

While risk tolerance and risk capacity may be related, they are separate considerations. Risk tolerance refers to the producer’s emotional ability to withstand commodity price volatility or rapidly falling prices. Someone who is risk-averse may lose sleep during times of high soybean price volatility; someone who is risk-loving may be willing to accept exposure to soybean price fluctuations during the same volatile period. Risk capacity is the maximum amount of loss the farm enterprise can tolerate, regardless of the producer’s attitude toward risk. After a good year, a farm enterprise may be capable of withstanding up to $25,000 of potential losses on soybeans; such a loss would be painful, but the farm could eventually recover. A $25,000 loss may bankrupt the same farm following a bad year.

Implementing an appropriate marketing strategy requires preparation. Mainly, the producer needs to establish:

1. How much potential loss am I willing to accept? [tolerance]
2. What is the maximum loss the farm can withstand? [capacity]

   Reviewing the broad financial picture of the farm by evaluating the cash flows, current liquidity, and profitability will help determine the answers to A and B. Since risk tolerance can exceed risk capacity, whichever one is lower, A or B, is a limit to keep in mind. The next information to consider is:

3. What is the break-even price per bushel? To find this value, we must solve for the soybean price when profit equals zero.

   \(\text{soybean revenue} − \text{soybean costs} = $0 \rightarrow\ \underbrace{\left(\text{price}_{\text{soy}}\times \text{yield}_{\text{soy}} \times\ \text{acres}_{\text{soy}} \right)}_{\text{soybean revenue}}= \text{soybean costs}\)

   This equation can be rearranged as:

   \({price}_{soy}^{breakeven}=\frac{soybean\ costs}{yield_{soy}\ \times\ acres_{soy}}\)

4. At what price will you meet the loss limit determined in steps A and B? Say the loss limit is $X; what price per bushel is the loss limit then reached? The process is very similar to finding the break-even price.

   soybean revenue − soybean costs= −$X

   → soybean revenue = soybean costs − $X

\(\rightarrow\ \underbrace{\left(price_{soy}\times yield_{soy} \times\ acres_{soy} \right)}_{soybean\ revenue\ }= soybean\ costs −\ $X \)

This equation can also be rearranged as:

\({price}_{soy}^{loss\ limit}=\frac{soybean\ costs-$X}{yield_{soy}\ \times\ acres_{soy}}\)

Items C and D require budgets because costs are needed to solve for the break-even and loss-limit prices (enterprise budgets are provided at the end of this chapter). The steps also require making an informed assumption about yield. A reasonable assumption would be to project a trend yield based on a farm's historical yields to account for the fact that in a scenario of an increasing yield over time, the APH yield will lag behind the expected yield based on a projection using the trend yield. Finally, you must decide how many acres to plant. Deciding on the number of acres to plant before knowing prices and yields is challenging when multiple crops, for example, corn and soybeans, compete for acreage. Consequently, these limits may need to be revisited and revised during the planning stages.

The following subsection provides a common set of tools to manage price risk. To use these tools appropriately, it is important to understand how prices in North Carolina will be related to national soybean prices.

The Chicago futures price, which we consider the national soybean price, is a contract in which a buyer and seller agree to a price for a standard quantity of soybeans that will be exchanged at some future date. Futures prices change daily, reflecting national changes in supply and demand. National storage stocks plus national acres planted combined with average national yield make up the total U.S. soybean supply. Midwestern states, such as Illinois, Iowa, Minnesota, and Indiana, are the largest soybean-producing states in the U.S. These states are physically closer to future market delivery locations in Chicago. In addition, these Midwest sources are export-oriented, given their advantageous proximity to the Mississippi River. Therefore, national prices will adjust with national supply, which depends largely on the market conditions in the Midwest.

North Carolina markets are different. Rail is the primary link between North Carolina markets and the more distant Chicago and Midwest states. Also, North Carolina is a net-importing region due to our large livestock industry. In addition to what is happening nationally, North Carolina's supply and demand conditions can significantly impact the prices North Carolina producers receive; thus, North Carolina's conditions are important to consider as part of the local price risk.

The primary measure linking local North Carolina prices to futures prices is the “basis.”

\(basis={\underbrace{cash\ price}_{\text{price received in NC}}}-{\underbrace{futures\ price}_{\text{national price}}} \)

Rearranged, the equation is:

\(cash\ price=futures\ price\ +\ {\underbrace{basis}}_{reflects\ relative\ NC\ conditions}\)

Figure 12-1 compares the North Carolina cash price to the nearby Chicago futures price, showing that the relationship between these two price series adjusts over time. The basis can be positive or negative.

Unfortunately, the basis equation is deceptive in its simplicity. Futures contracts are specific to product quality, delivery location, and delivery time. The hidden feature of basis combines two price relationships: (1) prices today and the futures contract delivery date and (2) prices in North Carolina and futures contract delivery locations. Typically, the basis is reported using the nearby futures contract, which is set to expire next. Futures contracts are very specific, and prices are quoted for listed grades and quality, affecting the price received.

Figure 12-2 shows the average monthly Fayetteville immediate (nearby) soybean basis for each year from 2020 to 2024. Several aspects of soybean nearby basis for Fayetteville are notable. First, variation is driven by differences in the Fayetteville area's local demand and supply conditions for each of the five years. When supplies are plentiful or when demand is weaker for a given year, we can expect basis levels to be lower (weaker). When demand is stronger or supplies are short, we can expect the basis to be higher (stronger). Second, the basis is seasonal in Fayetteville and is lowest around harvesttime, when supplies are plentiful. Basis then increases (strengthens) in the postharvest months of January through September. A strengthening of basis during this period leads to higher soybean prices, encouraging growers to sell stored soybeans. Third, variation over the months across years is smallest during the harvest months and up through April. The one exception was attributable to the impact of COVID-19 in April 2020, when the basis was extremely negative because nearby futures prices briefly increased significantly relative to the local price in Fayetteville. Beginning in May and when local supplies are being drawn from storage, the variation in basis over the same month but different years becomes larger up until September across the various years.

Figure 12-3 compares Fayetteville's monthly average nearby basis for the five-year averages of 2020-2024 and 2015-2019. Several aspects of this comparison are notable. First, the seasonality of the basis is evident, with the lowest levels occurring at the harvest and then strengthening (becoming more positive) postharvest up until August, when the basis then weakens (declines) significantly from September until the harvesttime low in November. Second, the difference between these two periods across each month is very similar in value or almost constant, with 2020-2024 being about $0.50 higher compared to 2015-2019. This difference of $0.50 reveals that soybean farmers have more recently, in the past five years, averaged a higher basis than the previous five-year period. The reasons for this higher basis are complex, with many contributing factors. The factors for this increase include higher rail rates for soybeans that are imported, an increase in demand for more locally grown soybeans around the Fayetteville location, a higher basis on offer for soybeans to try and bid for planted acres for soybeans, and also some inflationary pressure of higher input costs and soybean prices. This increase in basis is the combined result of these factors (and others).

When thinking about North Carolina's soybean basis in general, there are a few assumptions to work from, which are usually, but not always, true.

• The soybean basis is more predictable than the total cash price.

• End users, such as crushing facilities, have a higher soybean basis than intermediary handlers.

• Soybean basis varies throughout the year and is lowest at harvest.

NC State Extension provides monthly online updates on historical price and basis data for many North Carolina locations. The locations for soybean markets are shown in Figure 12-4. The CME Group website provides futures prices. These data can be used to compare current offers to historical prices and basis levels.

This section emphasizes that North Carolina's prices are composed of two components that should potentially be included in a price-risk management strategy. A complete strategy will consider whether and how to manage basis, futures price, or both.

Hedging

The marketing cross framework shown in Figure 12-5 can help you map out a price-risk management strategy. It suggests marketing and hedging strategies based on national and North Carolina market conditions.

More information about each strategy follows and is summarized in Table 12-1, but it is important to stress that hedging is not free. Some apparent costs, such as fees, are associated with a particular strategy. Nonobvious costs can include time spent monitoring markets and managing your position. Some methods can limit the producer’s ability to gain from price increases. In general, hedging aims to reduce or eliminate the impact of falling soybean prices—the goal is not necessarily to maximize the soybean price.

In addition, the prescribed strategies do not specify how much to hedge and when to hedge. Typically, somewhere between zero to 60% of expected production is hedged. A natural time to place a hedge is at or after planting, once a reasonable production expectation can be formed. But hedges can be placed at any time. Someone may place a hedge at a particular time to secure advantageous soybean prices or because the farm's financial circumstances have changed. Having the farm-specific guardrails and price objectives in mind will guide these decisions as situations evolve.

Using futures and options

Futures and options are used to manage national price risk.

Hedging with futures: To initiate a futures hedge, someone sells soybean futures (in other words, goes “short") for the contract expiring just after harvesttime. Then, at harvest, when delivering to a local buyer for the cash price, the futures market is exited by buying soybean futures (in other words, it goes “long”).

Per bushel outcome on hedged production

\({\underbrace{cash\ price\ }}_{received\ from\ local\ buyer}+\ {\underbrace{\left(futures\ sell\ price-futures\ buy\ price\right)}}_{futures\ market\ profit\ or\ loss}\)

Important note:

Because a futures contract is an agreement to buy or sell in the future, a margin deposit representing a fraction of the total contract value is required. The deposit is required for both buyers and sellers at the time of the trade. From then on, all gains and losses from day-to-day price changes are reflected in the margin account. If a margin account balance falls below a certain level, the producer will receive a margin call, which is a notice from the broker to deposit additional cash into the account immediately. This process is part of the safeguards to ensure the financial integrity of futures contracts. Someone hedged with futures should always have cash on hand while the futures position is open, which may be feasible only for some.

Another obstacle for producers is that a soybean futures contract for 5,000 bushels may be too large (or too lumpy) of a quantity to hedge, depending on the farm’s expected soybean production. Smaller-size futures contracts of 1,000 bushels, called “minis,” are available. However, minis tend to have lower trading activity levels than standard-size contracts, adversely impacting liquidity and the ability to exit and enter the market.

Hedging with options: To initiate a hedge using options, the producer should buy "put" options on the soybean futures contract that expire just after harvesttime. A put option gives the holder the right to sell a futures contract at a specific price called the strike price. The fee for this right is called the option premium.

Per bushel outcome on hedged production

In this case, the outcome depends on how the futures price and strike price compare at harvesttime. If the futures price > strike price then the put option expires, amounting to:

cash price − put premium

However, if futures price < strike price, then buying a futures contract at the current market price and exercising the put option to sell at the strike price amounts to:

\(cash\ price-put\ premium+\left({\underbrace{futures\ sell\ price}}_{put\ option\ strike\ price}-futures\ buy\ price\right)\)

Important note:

Options are not available for mini-size futures contracts. However, unlike futures, buying an option does not require maintaining a margin account.

Contracting with a local buyer

The only way to manage basis risk is to contract with a local buyer. However, local buyers often offer contracts with means of managing national price risk. There are endless ways to design these contracts, including incorporating futures markets, and they can quickly become complex. Two of the more straightforward and commonly used contract types are cash forward contracts and basis contracts.

Hedging with a cash forward contract: Make an agreement with a local buyer for the total price they will pay per bushel upon delivery during harvest. Since the total price per bushel is agreed upon, fluctuations in future prices and basis are no longer relevant to the quantity hedged.

Per bushel outcome on hedged production

forward contract price

Important note:

In this case, both national price and basis risk are transferred from the producer to the local buyer. Because of this, local contracts can have service fees or built-in risk premiums. And because a local custom contract is not traded on an exchange, futures market structures to easily enforce the contract and provide flexibility to exit the contract early are unavailable.

Hedging with a basis contract: Make an agreement with a local buyer for the basis they will pay per bushel upon delivery during harvest. This locks in basis but leaves someone exposed to fluctuations in the futures price.

Per bushel outcome on hedged production

futures price + contract basis

Important note:

In this case, only basis risk is transferred from the producer to the local buyer. These contracts may also include service fees or built-in risk premiums.

Figure 12-1. Fayetteville versus nearby Chicago futures prices.

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Figure 12-1. Fayetteville versus nearby Chicago futures prices.

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Figure 12-2. Fayetteville average monthly immediate basis for 2020-2024.

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Figure 12-2. Fayetteville average monthly immediate basis for 2020-2024.

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Figure 12-3. Comparison of Fayetteville monthly average basis for 2015-2019 compared to 2020-2024.

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Figure 12-3. Comparison of Fayetteville monthly average basis for 2015-2019 compared to 2020-2024.

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Figure 12-4. Locations with historical soybean price and basis data.

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Figure 12-4. Locations with historical soybean price and basis data.

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Figure 12-5. The marketing cross.

Source: A Guide to Price-Risk Management in Grain Marketing for North Carolina, South Carolina, and Georgia (content.ces.ncsu.edu/pdf/a-guide-to-price-risk-management/2018-07-23/basmaker_curtis.pdf).

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Figure 12-5. The marketing cross.

Source: A Guide to Price-Risk Management in Grain Marketing for North Carolina, South Carolina, and Georgia (content.ces.ncsu.edu/pdf/a-guide-to-price-risk-management/2018-07-23/basmaker_curtis.pdf).

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This section discusses supply and demand conditions in North Carolina and nationally. It highlights the relationship between supply and demand trends and prices, providing context for developing a marketing and risk-management strategy. Outlook factors discussed here are time-sensitive and can become outdated quickly. Market outlooks can have either a short-run or long-run perspective.

The USDA’s World Agricultural Supply and Demand Estimates (WASDE) are prepared and released monthly by the World Agricultural Outlook Board (WAOB), and annual forecasts are provided for the supply and use of U.S. and world soybeans. Some months can see significant changes in these estimates, particularly at different times of the marketing year, and in other months, changes to the estimates are minimal. The following discussion highlights some essential concepts about expectations and essential relationships in play moving into a new crop year.

North Carolina Soybean Production

Over the period of 2019 to 2023, the North Carolina soybean crop averaged about $746 million and, in a good year, the crop was worth as much as $931 million to farmers (2022). North Carolina farmers planted an average of 1.573 million acres of soybeans during the 2019 to 2023 period (Table 12-2). Soybeans have the most significant footprint in row crop acres in North Carolina, with most soybean acres in the eastern part of the state in the coastal plain. The five-year (2019 to 2023) average production was 61.029 million bushels, with an average yield of 38 bushels per acre over the same period (Table 12-2). In a good crop year, yields have been as high as 40 bushels per acre (2021). The five-year (2019 to 2023) marketing year average price was $12.08 per bushel (Table 12-2). A final important point is that North Carolina soybean production accounts for a small share of national production, explaining why it has minimal influence on prices nationally. For example, in 2023, North Carolina’s share of national production was 1.5% (62.7/4,165)—North Carolina bushels over total bushels produced nationally.

Since 2015, soybean acres planted in North Carolina have been on a downward trend. However, in 2020, North Carolina farmers planted 1.6 million acres of soybeans, which represented a turnaround in declining acreage. Acreage had been on the decline over the previous four years from the most recent high of 1.82 million acres in 2015 (see Table 12-2 and graph a in Figure 12-6). Acreage slightly increased in the next two years (2021 acres were at 1.65 million, and 2022 were at 1.7 million) and achieved the trend-level planted acres in 2022 (see graph a in Figure 12-6). Since then, soybean acreage in North Carolina has slightly declined to below-trend levels, with 1.64 million acres planted in 2023 and 1.63 million in 2024. The years 2021 (with a record yield of 40 bushels per acre) and 2022 (with a record price of $14.40 per bushel) saw cash receipts increase significantly to above-trend levels—to $860 million in 2021 and $930 million in 2022 (a record). In 2023, cash receipts pulled back to trend levels of about $809 million due to slightly fewer acres planted (a reduction of 600,000), a reasonable growing season achieving a trend yield (38.5 bushels per acre), and a lower soybean price of $12.90 per bushel. At the time of this publication, the 2024 expected production was estimated to be 58.32 million bushels, a decline of about 7.1% from 2023 levels. This reduced production was attributable mainly to lower estimated yields in 2024 of 36 bushels per acre and slightly fewer acres harvested. With current new crop soybean futures trading at about $10.13 as of November 2024 and using a historical basis estimate for nearby basis at harvesttime in Fayetteville of about $0.32 per bushel, the current best estimate of harvesttime prices is about $10.45 per bushel in Fayetteville. With 2024 new crop local prices at about $10 per bushel currently and with an expected lower production of 58.32 million bushels, cash receipts for soybeans for 2024 are tracking to be in the low $600 million range. This represents a significant decline from the record $931 million in 2022.

The four graphs in Figure 12-6—(a) acres, (b) yield, (c) production, and (d) prices—reveal upward trends over 2000 to 2024 forecast for all four factors of production. The year 2015 was record-setting, with a planted average of 1.82 million acres. For the next four years, soybean planted acres plummeted, with a decline of 280,000 acres, or a 15.4% decline in 2019 to 1.54 million acres. Since then, acreage has been trending up and returned to the average-trend levels in 2022 of 1.7 million acres. In 2023 and 2024, soybean acres again declined and are below-average trend, with planted acres of 1.64 million in 2023 and 1.63 million in 2024. The lower acreage in 2024, combined with a reduced expected total yield of 36 bushels per acre for the North Carolina state average due to unfavorable growing conditions in 2024 (significant drought during the summer months followed by significant rainfall in many areas of the state), has the 2024 crop production pegged at 58.32 million bushels. This represents a 2.709-million-bushel decline (or 4.4% reduction) from the previous five-year average (2019-2023) of 61.029 million bushels. This reduction in local production or inward shift in supply provides some positives for local basis in North Carolina, and prices are dragging down the futures component of the local prices in North Carolina, meaning that expected local soybean prices will be lower in 2024 with a best estimate for Fayetteville prices to be about $10.45 per bushel at harvesttime in Fayetteville. (More favorable growing conditions in the major growing regions of the U.S. in 2024 led to an expected record average national yield of 53.2 bushel per acre, but that bumper crop will negatively influence local prices.)

Source: USDA/NASS Quick Stats (Accessed Sept. 17, 2024)

U.S. Soybean Situation and Outlook 2024

Table 12-3 highlights the current demand and supply of U.S. soybeans and the outlook for U.S. soybean markets moving into 2024/25. The national soybean crop in 2024 is expected to be 10.2% higher than the previous year’s crop, with a total production of 4.589 billion bushels. The higher production level resulted from an increase in acreage to 87.1 million (an increase of 4.2% from 2023) and a gain in yields of 53.2 bushels per acre (an increase of 5.1% from 2023). The expected 53.2-bushel yield in 2024 is slightly above the trend yield and will be the highest yield on record. The planted acreage of 87.1 million acres, combined with the record yield, will produce a record 4,586-million-bushel crop. Combining this year's production with beginning stocks of 53.2 million bushels amounts to a total supply of 4,941 million bushels (the second-highest level in history). Expected annual soybean crush in 2024/25 is projected at record levels of 2,425 million bushels, representing a 5.7% increase from 2023. Expected export levels are projected to be 8.8% higher than the previous year, at 1,850 million bushels. However, these higher exports are well below the records set in 2020, when they were 2,265 million bushels or 415 million bushels higher. Combining the expected record crush with the improved exports amounts to a total demand of 4,389 million bushels. Despite the record crush and the significant improvement in exports, it will mean adding some bushels to ending stocks, with projected ending stocks of 550 million bushels, a 61.8% increase from 2023 levels. This significant increase in stocks provides a significant boost to buffer stocks and an increase in ending stocks as a percentage of use to 12.5%, a 51.4% increase over 2023. The higher ending stocks dampen price prospects moving forward, with the U.S. season average prices currently estimated to be $10.80 for 2024/25, $1.70 less than in 2023, or a 13.6% decline. These significantly lower prices offset the revenue impacts of the record yields in 2024 for farmers with record yields and contribute to profitability challenges for some growers, especially farmers experiencing less-than-record yields.

With production in 2024 outstripping demand for the second year in a row (which was not the case for the previous three years), as illustrated in Figure 12-7, there is an estimated increase in ending stocks in the past two years of 286 million bushels (76 million in 2023 and 210 million in 2024), which represents a 108% increase from 264 million bushels in 2022 to 550 million bushels in 2024. Figure 12-7 illustrates the market in response to back-to-back years of production outstripping demand and adding to ending stocks, with prices averaging a high of $14.20 per bushel in 2022. Since 2022, prices have declined significantly, retreating $3.40 or a decline of 24% for 2024/25. The 2024 ending stocks of 560 million bushels is a substantially greater buffer than the stocks on hand the five years prior, where ending stocks averaged 332 million bushels (average taken for 2019/20—2023/24). This buildup of higher ending stocks means that the perilously tight supplies the market endured during 2020, 2021, and 2022, where there had to be considerable demand-rationing to avoid running out of soybeans, have passed. The reverse is now true. With the lower prices in 2024/25, we should see continued growth in use and the possibility of fewer soybean acres planted in 2025, all of which will contribute to utilizing and using up these above-average stocks. Ending stocks are back to and even exceed the levels last experienced in 2019, when ending stocks were 525 million bushels and the average market price was $8.57 per bushel. Interestingly, 2024 prices are projected to be $2.23 per bushel higher, at $10.80, with ending stocks of 560 million, compared to 2019, when ending stocks were 525 million and average prices were only $8.57 per bushel. This comparison suggests that the current projection of $10.80 per bushel for 2024 could be overly optimistic, and prices could decline less in 2024, if 2019 is any guide. These lower prices in the 2024/25 marketing year will drag on new crop soybean planting decisions, as soybean producers manage lower profits for their 2024 crop and will have limited upside potential on new crop prices in 2025 due to higher stocks. The lower prices for soybeans moving into 2024/25 and beyond, without commensurate reductions in production costs, will mean lower net returns to soybean producers. Not only have U.S stocks of soybeans increased for 2024/25, but so have the ending stocks of the major soybean exporters, having increased to 79 million metric tons (MMT) in 2024/25 from 62 MMT, an increase of 27% (USDA WASDE, September 2024). Thus, higher ending stocks of soybeans domestically and globally in 2024/25 will mean lower soybean prices in the U.S. and worldwide in the shorter run and increased demand for these cheaper soybeans. Upside potential for soybean prices will not occur until these additional stocks are depleted due to the additional demand or future crop production being lowered due to fewer acres being planted in 2025 or unfavorable growing conditions in 2025 and beyond. In sum, current outlook conditions for soybeans reflect current demand and supplies in the U.S. and globally of higher ending stocks and a transition in 2024/25 from a period of higher prices in the past three years into a period of lower prices moving forward, due to several years of production outstripping demand and the buildup of ending stocks in the U.S. and globally.

Source: World Agricultural Supply and Demand Estimates (WASDE), USDA Sept. 2024

Figure 12-6. North Carolina Soybean Acres, Yield, Production, and Prices

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Figure 12-6. North Carolina Soybean Acres, Yield, Production, and Prices

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Figure 12-7. U.S. soybean production, demand, ending stocks, and price 2020–2024P.

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Figure 12-7. U.S. soybean production, demand, ending stocks, and price 2020–2024P.

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Variable Costs

The input costs in the soybean enterprise budgets (Tables 12-4 through 12-7) are based on data collected in the fall of 2024 and are not predictive for the coming year. Actual costs of inputs are subject to change based on supply and demand moving into the planting season. Land rent is not included; growers should add any costs of particular arranged agreements. Consulting services include the cost for soil sampling, analysis, and scouting, per acre. Fertilizer spreading is the cost of one custom application. Maintenance in the title of budget refers to a level of maintenance applied to a given field based on its best historical yield potential. It is assumed that growers apply the best level of care to any given field based on its potential and annual needs.

Equipment Costs

Tractor and machinery costs utilize an average purchase price of equipment, with the assumption that it was purchased new three years in the past. New equipment prices are highly variable based on horsepower, brand, equipment specifications, and attachments. Median prices are used given a possible high and low purchase price. All fixed costs of equipment include insurance, depreciation, and taxes on an economic basis; this captures the actual costs of the equipment as it is used per hour and is not the same as the tax liability depreciated out based on Schedule F rules. In general, it is assumed that power units are used between 300 and 500 hours annually. Fixed and variable costs of equipment are based on time over field estimates given width of equipment and speed. Speed estimates are based on equipment specifications, specialist recommendations, and grower conversations about actual utilization in the field. The costs that are included assume the actual time for each activity for that specific crop with inefficiencies included for travel, equipment setup, and cleaning. Carrying costs of equipment are not included, but overhead is included to capture some incurred costs that are not directly related to crop planting, maintenance, harvest, and transport.

Gross Receipts

Gross receipts are estimated assuming a futures prices for the fall of 2025 plus the average basis date for the past three years for the state of North Carolina. On average, growers received a $0.32 positive basis above the market price for soybeans between 2022 and 2024; this assumes an average of all sales points for grain across the state. Wheat gross receipts in the double-crop budget (Table 12-7) assume a positive $0.75 basis based off the average corn basis for the state during the same time frame and assumes the crop is sold as feed wheat on contract. Futures prices for wheat in the spring of 2025 were used as a best estimate of possible returns.

You can find interactive online budgets tools at go.ncsu.edu/enterprise-budgets. You may download a variety of spreadsheets to assist you in planning for the 2025 crop year, including the crop comparison tool. Included with each budget set are comparison tables that allow you to look at various costs and returns with various crops simultaneously based on your rotational scenarios. If you have any questions, edits, or feedback, contact Derek Washburn at dawashbu@ncsu.edu or 919-515-4614.

Budget Tables

Break-Even Yield

Variable costs: 40 bu.

Total costs: 55 bu.

Break-Even Price

Variable costs: $6.40

Total costs: $8.97

Break-Even Yield

Variable costs: 35 bu.

Total costs: 50 bu.

Break-Even Price

Variable costs: $7.88

Total costs: $11.27

Break-Even Yield

Variable costs: 37 bu.

Total costs: 52 bu.

Break-Even Price

Variable costs: $8.49

Total costs: $11.89

Break-Even Yield

Variable costs: 92 bu.

Total costs: 124 bu.

Break-Even Price

Variable costs: $10.68

Total costs: $14.32