Market Matters Blog

The market is telling farmers to put the corn they're harvesting in the bin. Darin Newsom helped me explain this idea in an article DTN ran a few weeks ago (Dust Off the Storage Hedge, which you can find it in the Market Matters blog history). Currently, the December-to-March corn spread is at 12.5 cents. With full commercial carry costs at 18.32 cents, the spread as a percentage of that cost is 68%, an indicator of a bearish market attitude that encourages storing grain.

This is a relatively new feature DTN's put together for our online and satellite subscribers. You can find a daily computation of the cost of carry on Ag News page 19. I'll also try to include it in my blog each Friday. Below is our explanation of how the cost of carry and this week's tables.

Full commercial carry is the total cost of storage and interest to hold grain in commercial storage. For the corn and soybean table, DTN uses a daily storage rate of 0.00165 cents per bushel (roughly 5 cents per month) and an annual interest rate of 3.1% (this provided by one of the largest commercial grain hedging firms in the industry).

The percent of commercial carry (% FCC) divides last daily price in futures spreads by full commercial carry. The higher the percent of full commercial carry a spread reflects, the more bearish the market's view of supply and demand. Conversely, a lower percent reflects a more bullish view of fundamentals. A negative reading occurs when spreads are inverted, or in other words, when the nearby futures contract is higher priced than the deferred contract. This relationship represents a bullish supply and demand situation, with the larger the negative number the more bullish fundamentals are.

CORN

SOYBEANS

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