From an operational standpoint, on-farm storage helps keep combines rolling during harvest. The benefits should apply to marketing, as well, allowing farmers to hold onto their grain until they’re on the other side of harvest lows and wide basis.
“This year, basis is going to be even more important in the decision-making process,” says Farm Journal Economist Bob Utterback. “If you’ve made forward cash sales and are long the basis (forward sold flat price but haven’t locked in local cash price), your marketing plan should be to wait as long as possible to lock up basis against forward cash contracts when end users will have to narrow basis to buy inventory.”
For farmers putting unpriced grain in the bin, gambling on the basis to narrow, the risk is the deferred price falls to the nearby price due to ample supply resulting in a loss. Should you put grain in the bin or hold it on paper?
“I prefer to store corn and buy back soybeans on paper,” Utterback says. Don’t let on-farm storage become a crutch for bad marketing habits. “You can’t put grain in the bin and neglect to capture the market carry,” Utterback says. “If the market is paying you 35¢ to store grain from November to June, you have to forward contract, sell futures, buy put options, etc., to take advantage of the opportunity to store.”