Storing corn and soybeans until spring might not be a paying proposition this year. In east-central Illinois, the current cash bid for harvest delivery of corn is 12¢ under December 2011 futures, or 35¢ under July 2012 futures. The bid for March 2012 delivery is about 24¢ under July futures.
"The 11¢ premium for March delivery will not nearly cover the cost of owning and storing corn until March," says Darrel Good, University of Illinois ag economist.
If, for example, the cash price in March was expected to be 10¢ under July futures, a 25¢ per bushel return to storage could be captured by selling July futures. The interest cost of holding corn from harvest to March would likely exceed 12¢ per bushel, leaving only 13¢ to cover storage costs. "A larger return would occur if the basis were stronger than expected, and vice versa," Good says.
For soybeans, the current harvest delivery bid in east-central Illinois is 28¢ under November 2011 futures or 45¢ under July 2012 futures. The bid for March 2012 delivery is 30¢ under July futures.
Again, the 15¢ premium for March delivery would not pay the cost of owning and storing the crop until March. If a stronger basis, say 10¢ under July futures, were expected by March, a storage return of 35¢ would be expected from selling July futures. The interest cost of owning soybeans until March 2012 would be 23¢ per bushel, leaving only 12¢ to cover storage costs. A larger or smaller return could occur depending on the magnitude of the basis in March.
- October 2011