Short crops have a long tail, according to a widely spread adage about the grain market. Prices that fade after a big spike higher can mean losses for farmers who put grain in the bin hoping for better markets down the road.
But Farm Futures long-term study of storage strategies shows results can vary widely in short crop years. So to help your decision making process we're again presenting results for different locations around the country from the 1985 to 2011 crop years.
Farm Futures has tracked returns for different cash, futures and options strategies for nine corn and eight soybeans locations. In addition to year-by-year results by location for each strategy, these files contain summaries to help farmers balance overall risk and return. Depreciation on bins and equipment vary widely depending on age of the facilities, so these figures do not include any expense for capital costs, though operating costs are figured at as close to market rates as possible. On-farm storage costs include interest charge on stored grain using prevailing operating and CCC loan rates. Handling charges are 1 to 2 cents per month for on-farm storage, 2.5 to 5 cents per month for commercial storage.
In addition to net gains and losses over the harvest price, the results include the number of years the strategy made money as well as a factor for risk -- the unpredictability of returns. The higher the risk number, in general the greater both the gains and losses from a strategy may be.
All positions are initiated in first week of October and liquidated upon expiration of July options for corn
and soybeans. Brokerage commissions and slippage figured at $100 per round trip, or two cents per bushel.
Futures and options results are based on official Chicago Board of Trade settlement prices; results were estimated for a few dates when trades did not take place using a widely followed options model.
However, all results are hypothetical, not the result of actual trades. Moreover, past performance of a strategy is no guarantee of future results.