Changes Coming to Corn Carry, Requires Marketing Differently

April 21, 2019 05:30 AM

Corn spreads are changing and it could have an impact on marketing decisions. Joe Vaclavik of Standard Grain detailed how farmers may need to change their thinking during a recent conversation with AgDay's Clinton Griffiths

"If you look at your corn spread say December 19 out into any of the 2020 contracts they are right now about as wide as they would typically be at harvest following a good crop," says Vaclavik. "They are very wide." 

He says the CME Group and CFTC have increased the storage rate that they're going to use in their calculations from 5 cents a month to 8 cents a month. 

"Essentially, what this is going to allow is more carry to exist in the market if it's necessary," says Vaclavik. "If we're oversupplied or supplies remain burdensome those carries can widen out."

Vaclavik says that's going to affect a couple of things when it comes to market action. 

"First off, if you're a farmer, you probably have to chang the way that you think of the corn spreads in some respect," says Vaclavik. "The other issue here is that we've got a record short in the corn market and I will tell you, it is much easier to maintain a short position in a carry market than it is a long position."

This change is going to make it easier for the funds to stay short the corn market. 

"It's kind of like what they've done in the wheat market for years," says Vaclavik. "They'll just carry this short position, even through rallies they can carry it and they can roll and capture it."

See Joe's entire explanation and the impacts for farmers in the video below.

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Spell Check

Central, IL
4/20/2019 11:31 AM

  To Wall Street, the American farmer is expendable. No two ways about it.

rural country, ND
4/20/2019 08:59 AM

  Just great,another way to just keep screwing a farmer.How would they like to work for nothing.If they keep going like this,some day were going to starve right here in the usa just keep it up and not pay the farmer, what a disgrace.

auburn, IN
4/21/2019 12:47 PM

  they are getting rid of the small and middle size farmers, can't control them , much easier to control 5 huge corporations than 1000 mid-size farmers, just like John Deere did with their dealers, CIH, the seed industry, the fertilizer industry, very large corporations = the very wealthy owning everything


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