For much of the current marketing year, the corn calendar spread structure (soybeans are similar but to a lesser extent) has been offering carry greater than money cost through the May contract, a tighter May to July spread, with an inverse in the July to September spread.

In 2025, corn basis has generally been below CBOT delivery clearing values for most of the forward curve. From a Merchandising 101 perspective, this dynamic signals a merchandiser to keep hedges in the nearby month and wait for stronger basis levels or further widening of calendar spreads. With the March-May, this widening ultimately occurred with H/K trading wider than -16 as First Notice Day approached. On that same day, K/N traded a low of -6.75. Meanwhile, N/U was trading a plus-20-cent inverse. This was a function of heavy farmer selling in Q1 and Q2, coupled with a tight ending stocks figure of 1.54 bbu (March WASDE).

For the merchandiser, the key in this environment is having grasp of the available time, space, and money. In the Merchandising 101 scenario referenced earlier, time was the key component to staying hedged in the March. The more flexible one was to make a nearby sale should basis firm, the more confident one could stay in the nearby. If logistics (time) were more limited, hedges needed to be rolled sooner. Rolling at a carry net of money provides a return to space while subsequent spread widening presents an opportunity loss.

Contrast that opportunity loss with a merchandiser who is out of time, space, or money vs. the July and has to roll short N hedges to the U at an inverse. That can become a real loss rather than opportunity loss unless the basis vs. the U becomes high enough to overcome the spread inverse.

This is a dubious wager. Most inverted corn markets do see periods of high absolute basis levels paid vs. the U. But, the market ultimately converges to option price Chicago in the September delivery period. Be very cautious presuming your end user or terminal will pay huge numbers vs. the U in August.

The real key to merchandising around limits of time, space, and money is controlling the bid. If logistics are tapped through June-July, meaning any new purchases will be sold vs. the U (post inverse), then the producer bid needs to reflect these values. Be certain not to bid more than can be sold vs. the appropriate delivery period. Additionally, consider an N/U CSO to protect large spread moves. The CSO market is liquid and has bid/ask depth.

Ultimately the goal, if N/U remains inverted, is to be short the basis vs. the N and get an opportunity to roll long futures forward at the inverse. This is the artsy part of merchandising as it can mean selling numbers light of delivery clearing values if replacement (producer pricing of Price Later bushels) cost is less than the sale.

Know your farmer, know your logistics, make sure interest cost/earning is credited properly to the P&L, and be aggressive originating PL bushels.

Curt Strubhar is a risk management consultant for Advance Trading, Bloomington, IL; 309-664-2326;
cstrubhar@advance-trading.com.