The risk faced by producers in the 2022 growing season was unprecedented. As farmers were in the field preparing to plant their crop, Russia invaded Ukraine fueling uncertainty across the world and in agricultural input markets. A few months later, rain fell across the midsouth causing a great deal of yield losses stemming from late planting and prevented planting (Figure 1). Of the $1.4 billion in rain-related losses across the U.S., $0.4 billion were primarily in the midsouth states (USDA-RMA, 2022). In the summer, drought struck the entire United States which resulted in significant crop losses in Texas, Oklahoma, and parts of the east coast (Figure 2). Of the $3.9 billion in total drought-related losses across the U.S., $2.4 billion were in the southeast (USDA-RMA, 2022).
In addition to the production losses stemming directly from weather, many farmers experienced indirect price losses stemming from the low water levels in the Mississippi River. These price losses at the local grain elevator came in the form of extremely weak basis during arguably the most unfortunate time: harvest. During the usual harvest window, basis, or the local cash price less the relevant futures price, fell from about 40 over to 125 under (Figure 3). Once the river levels increased, basis strengthened to about 50 over and has stayed relatively consistent at this level even though most new crop delivery from the 2022 harvest is finished. However, farmers with on-farm grain storage may want to take advantage of the strong basis and deliver either grain from the 2021 old crop or newly stored grain from the 2022 new crop.
While measuring crop yield losses generally occurs throughout the growing season, USDA-RMA harvest prices are determined in the months of August through November depending on the state and crop. In the southeast, the harvest price was greater than the projected price, except for cotton and a few soybean exceptions (Figure 4). While corn, sorghum, and rice experienced a 10-21 percent increase in the harvest price relative to the projected price, cotton experienced between a 20-21 percent decrease in the harvest price over the projected price. Harvest prices for soybeans experienced between a 4 percent decrease and a 5 percent increase over the projected price. [READ MORE]