Producers across the country have high levels of on-farm grain storage capacity. Farmers can use bins to increase their profits, but can also lose money with storage if they don’t sell their grain at the right time.
“We have a tremendous amount of on-farm storage,” Don Rose of U.S. Commodities told “AgDay” host Clinton Griffiths. “What producers need to concentrate on is to put on a merchandising hat, and not use bins as a speculative tool.”
What he means is that if you have storage on your farm, it’s important to make sure you’re getting a return on it, which means paying extra attention to the market.
“If the basis is right, does it make sense to move the grain?” he asks.
Rose says if there’s not enough carryover in the corn and soybean market, you have to sell your grain and take your ownership in a different direction.
“Between January and March, when you have 4-cent carryover (in soybeans), you can’t hold. If the basis is right, you have to sell it,” Rose explains.
There are still some options for producers to maintain ownership, according to Rose.
“If you still want to maintain ownership, you can change your ownership,” he says. “If you don’t want margin call exposure, go into some kind of options strategy or bull call spread in the month you think it will go up the most.”
Rose says on-farm storage is a great tool for producers if they use their entire chest of tools to their advantage. “Don’t let your storage space be a negative for you when you’re trying, in these tight margins, to get a return on your investment,” he adds.
Watch Rose on the segment of “AgDay” below: