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Can the futures market replace storage?

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  • Can the futures market replace storage?

    Does anyone think you can replace building grain storage by selling all your grain at harvest then buying it back in the futures market to sell later? I haven't put any thought into it. I figured I could throw it up on here and some one could tell me why that's either a good or bad idea.

  • #2
    In years when there isn't much difference between harvest futures bids and forward futures bids- and/or when harvest basis is strong- owning your grain in futures contracts is the way to go.

    When harvest basis is wide/poor and/or carry in the market is large, using storage is a better deal.

    Short crop years often produce the best opportunities to either simply get rid of the grain early- or -sell the cash, buy futures, and use no storage. Why? Short crop years often cause the basis to be favorable/tighter at harvest and at times has even caused an inverted futures market where the CBOT harvest month bid is actually higher than the winter, spring, and summer months.
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