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Store your crop or not?

Agriculture.com Staff 09/25/2009 @ 1:21pm

Good weather and ample crops have turned $5 corn into $3 corn and $11 beans into $9 beans over the last few months. With harvest approaching, farmers may be tempted to shove that grain in the bin and hope for higher prices to return.

However, whether you store grain or sell it at harvest should be largely dictated by forward carry returns, and not your bias towards higher prices. The better way to bet on higher prices is with call options, not your grain in the bin – options are a cheaper and safer play.

So, what is the market offering for forward carry? An examination of cash markets around the country shows a wide disparity in the returns to storage. Clearly though, the market is rewarding corn storage versus soybeans. On average across all U.S. cash markets, the price incentive to store corn to January is 11 cents a bushel versus 8 cents for soybeans. Beyond January, it becomes even less favorable towards bean storage which reflects pressure from South America.

Soybean basis was sharply lower for the week, although some areas continue to have sporadic strength as processor needs dictate.

Good weather and ample crops have turned $5 corn into $3 corn and $11 beans into $9 beans over the last few months. With harvest approaching, farmers may be tempted to shove that grain in the bin and hope for higher prices to return.

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