Currently spreads on futures contracts suggest nice profits for storing corn, but losses to storing soybeans in the bin.  This is an excellent year to sell cash soybeans off the combine after taking the LDP.  Corn is another story, as spreads suggest excellent profits from storage with a 40 spread between Dec04 and Dec05.   With basis improvement into early summer, profitable storage returns could be near 30c/bu.  Wheat spreads fall in between corn and beans, about break-even from storage so once you can get a decent quality differential for your quality grain (which is mostly low protein HRS wheat), then its going to be time to make cash sales.

The corn market has as strong a return to storage as is even offered in futures spreads, suggesting a excellent return to on-farm storage into at least next summer.   Almost a 4c/bu/month carry in the spreads are offered out to May, with 3c/bu/month returns into the next crop year.  Typically corn basis peaks in July, so that is likely the date that most corn producers should plan to own corn on-farm until.  An excellent way to lock in profits from corn storage is to sell July futures in a storage hedge for 100% of corn in storage.  These hedges are likely to make money until about next April, when the threat of another growing crop (and less than ideal weather) could push corn futures higher. 

Currently Pro Ag is bearish corn futures, as the trend remains lower and we still have two more government reports on the 2004 crop that are likely to continue to reflect larger corn crops.  Corn exports are improving, but not enough to offset the increasingly larger US crop.  In fact, in 2004 we will shatter previous record yields by over 11%!!!  Its an astounding corn crop in 2004, and one which will likely mean very low prices for the next 3-6 months.  There is nothing bullish about the corn fundamentals, so we may need to use storage hedges on all corn for the next 6 months to lock in the profits from storage that are offered on the futures market.  Once we have 3-6 months of low prices (needed to build demand), as we move into spring planting and the risk of another growing season we will likely buy back 100% of 2004 corn sales.

The spread summary is:

Dec-Mar04       11c

Mar04-May04     8c

May-July03      6c

July-Sept       9c

Sept-Dec        8c

Wheat

Wheat prices are mostly suggesting normal carrying charges in futures, enough to cover the cost of storage but not enough to make a lot of money on storage.  Still, its quite a shift from last year when markets were inverted (paying less for grain stored than sold today).  Where last year selling cash grain was a no-brainer (and the only question was whether or not to reown on futures/options), this year the decision to store probably rests more on the quality of your grain than anything.  For producers who have 14 protein or higher HRS wheat, its probably a market that should be sold as protein premiums are as good as they've been in a long time.  However, for low protein wheat there still are very hefty discounts offered (40c/point of PRO) that can take a decent $3.40 cash bid down to $2.60 for 12 protein wheat.  There already are offers for any quality of wheat (including sprout damaged wheat) for $2.80.  At that bid, if you have highly damaged sprouted grain (especially if its low protein) its probably time to make a cash sale on that 'anything' quality bid. 

For those who have protein levels which push your cash bid below $3, we would store that grain until you can market it for at least $3.  This is especially true if your falling numbers are high and there is no sprout damage on this grain.  We should be able to fetch a $3 cash bid (or only 30-40c discount for all-protein wheat) at local elevators sometime in the next few months.  In summary, futures spreads offer neither a disincentive or incentive to store as they just cover the cost of on-farm storage.   So more important than spreads to HRS wheat growers is selling at the right quality premium/discount structure, especially since we have such a diversity of quality (protein and falling numbers).  There is probably a lot more money to be made selling grain to time with your quality discount/premium structure than based on spreads.  The fact that there is enough returns to storage in futures spreads just allows you to focus on the quality discounts/premiums to maximize your price without worrying at all about the timing of that sale due to spreads. 

Soybeans represent a market where you will likely lose money for every bushel of grain you store beyond harvest.  Basis is already decent for soybeans as buyers have had trouble attracting grain sales, while futures spreads suggest negative returns to storage as they are only paying basically 1c/bu/month premium for stored soybeans.  This is a market where all cash grain should be sold off the combine (except for quality problem soybeans such as green beans due to immaturity at first freeze). 

Net Pro Ag has recommended selling all cash soybeans.  We doubt there is any reason to own them back on paper as it appears we have plentiful stocks into the next few months.  US carryout levels are near record high, and we still have the chance that soybean yields will be hiked further in the October report, especially for southern and central corn belt states.  We see nothing bullish about soybeans for now until we can threaten a growing crop (either SAM or US crop).  Therefore, after selling cash soybeans we have no plans to buy back futures until we build enough demand to get rid of this large crop (which could take 3-6 months).  We also need to threaten a growing crop before prices can see any significant strength.  Unless soybean prices drop to $4.50 futures OR inflation stays strong, we may not buy back any 2004 sale with futures/calls  until sometime next late winter/spring.