Filling Your Grain Bins? Consider Calls to Manage the Risk

October 21, 2015 08:00 PM
Filling Your Grain Bins? Consider Calls to Manage the Risk

The analysts on the latest U.S. Farm Report understand why farmers are reluctant to sell their grain right now.

After all, current prices for corn ($3.80 for December futures) and soybeans ($9.05 for November futures) continue to hover below the cost of production.

And growers also have plenty of room to store those crops. Nationally, on-farm storage has risen dramatically in the past 12 months, with a 28% increase in on-farm storage of corn and a 133% increase in on-farm storage of soybeans. 

But just because a farmer may have room in the bins doesn’t mean he can afford to put that grain in there and forget about it.

“If it’s going to go in the bin, my recommendation is to sell forward and look at some calls if your basis is really, really good,” said Mike North of the Commodity Risk Management Group. “Take advantage of what is there right now and not just be taking an open risk in the bin.”

Listen to Mike North’s discussion with Ted Siefried on the Oct. 17 broadcast of U.S. Farm Report here:

He urged producers to look ahead to spring contracts for corn and the chance to capture the carry, which could provide some much needed revenue in such a challenging year. While corn basis appears to be strengthening in many areas, North said he remains concerned that harvest lows could still be ahead.

“The corn market is testing the September low (of) $3.74,” he said. “If that’s violated, we’re looking at a $3.60 price point as the next target. That creates some real trouble for guys that are really wanting to store corn, so what’s important right now is looking at what basis opportunities are in front of you, what the carry structure in the market is offering, and (then) start making some decisions about what you’re going to do with that corn, rather than just throwing it in the bin and hoping the price gets better.”

Farmers in areas with weak basis, especially for soybeans, may need a different strategy, particularly if they and local elevators are both running out of space.

“In that case, I think you’re looking at selling and then owning calls to re-own bushels,” said Ted Siefried of Zaner Ag. “You hope that basis improves over time for them as they work through that situation of having massive corn piles. But there is a bit of a carry in the market for corn. For soybeans, not so much. They are certainly not giving you incentive to store (them). They’re asking you to sell off the combine, basically.”

Watch U.S. Farm Report's "Markets Now" segment from Oct.  17 with North and Seifried:

Could soybean prices improve significantly anytime soon? The market doesn’t seem to think so. “There are more bushels than expected, and a lot of those bushels could be coming to market, considering the idea that there’s no incentive to store soybeans right now,” said North. “That could mean we might have to see more pressure on beans going forward.”

Do you think it's worth it to store soybeans this year? Let us know in the comments.

Back to news




Spell Check

No comments have been posted to this News Article

Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer