News Release for Immediate Release
Written by Paul Carr – Regional Extension Educator
August 5, 2003

Carrying Charges Developing in Corn This Year

Corn prices at harvest last year were around $2.20 to $2.30 per bushel. The price was high enough that no LDP was available and the market offered very little carrying charge to sell corn for a higher price delivered in the spring or summer. Nationwide we had a smaller crop. The 2003 U.S. crop appears to be much larger and the market is showing this. Prices have fallen off considerably while carrying charges have improved to offer payment to farmers, elevators, or anyone else that wants to store this year’s crop. Carrying charges (the price offered for deferred delivery being higher than that offered for nearby delivery) during a big crop year are usually highest during harvest discouraging extra bushels to be put on the market and encouraging bushels to be stored for later use.

Farmers can take advantage of big carries this fall, if they are available, by selling for deferred delivery – January through July – at the same time they LDP (if available) this harvest. This strategy limits upside price potential, but also limits downside price potential while locking in a positive return to storage. Data from Ed Usset, Grain Marketing Specialist with the Center for Farm Financial Mgmt. (University of MN), shows that the July futures price during harvest is higher about half the time and lower about half the time than it is during mid-May following harvest. Since odds are equal of the price going up or down, why not lock in a profitable return to storage and eliminate the risk?

As of August 5 the bid in southern Minnesota for corn delivered in June/July 2004 was 20-25 cents higher than for harvest 2003 delivery. Since 1996 the average difference on October 15 between the cash price in Blue Earth, MN and July futures minus basis the following June was about 35 cents. Last year the difference was 13 cents.

Farmers may have the opportunity this fall to lock in prices guaranteeing them a positive return to storage. Where carrying charges are at harvest will play a significant role in what marketing strategy to use at that time.