What Farmers Can Do If They're Running Out Of Bin Space

October 12, 2016 02:43 PM

On Wednesday’s crop production report, the USDA increased soybean yields to a record-setting 51.4 bushels per acre in the October report compared to 48.9 bpa in the August report. On the other hand, corn has steadily decreased. In August, the USDA forecasted 175.1 bushels per acre for corn, but dropped it to 173.4 bpa in October.

With this increase in soybeans, many farmers are wondering where to store the extra bushels. According to Brian Splitt of Allendale Inc. on AgDay, farmers don’t want to relinquish ownership of because of current pricing.

He suggests farmers compare prices of having physical ownership and having to pay to have crops stored to an at the money call. If farmers are waiting until the final production numbers are released in January and they store until January or February, options could allow to maintain ownership for less than storing at the elevator.

“[You’d be] eliminating the downside risk of futures,” said Splitt. “Maybe just buy a call and have ownership on paper.”

Farmers that still have bin space, said Splitt, can use the carry to your advantage. He forecasts March, May, and July contracts to come down to levels that Allendale is currently seeing December trade.

Watch Splitt on AgDay above.

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