Position Management

By the time you’re reading this issue of Grain Journal, the grain markets are likely focused on new crop planting of corn and soybeans in the heart of the Corn Belt. We’ll also have seen the U.S. Department of Agriculture’s report of planting intentions and likely be in a scenario of reduced corn acreage and increased soybean acreage from a year-on-year perspective.

For the warehouseman, ideally the corn market structure will remain one of rewarding a return to space (i.e., carry markets).

For the merchandiser, the shift to a carry structure makes the 2023-24 into 2024-25 marketing years present different opportunities than the most recent marketing years. Coming from years of relatively inverted cash markets, any sale was a good sale, so to speak. In a carry environment, nearby sales can be costly if one has time, space, and money to capture the returns.

Changing Market Structure

At the time of writing in late March, the corn market has moved from not only old crop futures carry but to an increasing level of old-to-new crop transition carry. Additionally, true new crop carries have widened with Dec. 2024/July 2025 at -$0.23. While interest rates have increased over the past two years, this still pays net carry beyond interest. We don’t advocate locking in carry at these levels. However, the market structure becomes important when planning new-crop bid levels and service fees. This applies perhaps even more importantly to the producer service charge for carrying old crop bushels into the new crop timeframe.

The volume model of origination serves the objective that all old-crop bushels need to be shipped, even in a carry market, to make room for new-crop handle. The margin model takes a dynamic look to make sure any undesired shipments (from a pure merchandising perspective) are replaced with a like level of service fees or larger new crop margin.

As a cliché, sometimes the cheapest harvest ownership is old-crop basis length. This does not of course mean closing the doors and missing harvest. But it does mean structuring service fees and new crop basis bids to ensure one is not selling ownership to replace with more expensive ownership.

Soybean Expectations

For soybeans, the old-to-new crop structure remains inverted. This implies delivery value bids for June/July shipments. Today’s forward bids aren’t quite there. We expect to converge, which means either a slight firming of June and July basis or carry building in the soybean futures calendar spread structure like corn. If today’s market structure sustains, soybeans are “easier” in the sense that one will be able to be sold up of ownership and short price-later volume. The new crop market structure for soybeans is also less return to space than corn with Nov./Jan. below money cost of carry and Jan.-onward mostly inverted. For short-spaced houses, futures bearspreads remain a consideration.