What is in this article?:
- Is on-farm grain storage part of your marketing plan?
- Market demand, farm income driving storage investment
“Today’s farming operations face risk not only from fluctuating commodity prices, but also input prices, yield variance and other factors which have forced producers to become more marketing savvy,” says ag consultant Adam Dryer, of Blue Reef Agri-Marketing, Inc., based in Morton, Ill. “We’ve seen a trend toward more on-farm storage in recent years because producers understand they can put more money in their own pockets.”
Dryer explains that the economics of on-farm storage can work to farmers’ benefit in two ways:
- The ability to bypass historically wide “basis” levels in the fall. Basis is the difference between the Chicago Board of Trade daily market price and the price that elevators pay to farmers. At harvest this price is typically much lower due to the fact that elevators are receiving large quantities of grain when there is no additional demand to account for it. Dryer notes that the basis spread may be more favorable to the producer, depending on his location, by storing and delivering grain at a later date, when the market has reduced supply and there is still demand.
- Higher prices when farmers contract their grain and store it for future delivery – known as market carry. For example, Dryer says that the combination of basis appreciation and market carry on a summer 2015 corn delivery contract could add 40 to 50 cents per bushel to a farmer’s gross revenue, assuming an average or better crop this season.