By Cory Walters, Sam McNeill and Doug Johnson, University of Kentucky
Each year producers decide whether to store or sell their Soft Red Wheat (SRW) crop. Producers typically choose the latter and sell their crop off of the combine. This year the Chicago wheat (SRW) futures contract is offering a large storage incentive. The relationship between July 2011 Chicago wheat futures and March 2012 Chicago wheat futures is a plus $1.04/bu (March = $8.63, July = $7.59). Putting grain in storage AND selling a March 2012 futures contract will gain you an additional $1.04/bu. However, there are other costs and risk associated with doing this. Storage decisions should be made based upon the carry offered in the futures market, storage constraints (coming from other crops), harvest constraints, storage costs, opportunity costs of money, and other costs.
Each year producers decide whether to store or sell their Soft Red Wheat (SRW) crop. Producers typically choose the latter and sell their crop off of the combine. This year the Chicago wheat (SRW) futures contract is offering a large storage incentive. The relationship between July 2011 Chicago wheat futures and March 2012 Chicago wheat futures is a plus $1.04/bu (March = $8.63, July = $7.59). Putting grain in storage AND selling a March 2012 futures contract will gain you an additional $1.04/bu. However, there are other costs and risk associated with doing this. Storage decisions should be made based upon the carry offered in the futures market, storage constraints (coming from other crops), harvest constraints, storage costs, opportunity costs of money, and other costs.