• A positive carry does not suggest higher prices in future months. It suggests we may be able to secure a return to storage.â€¨â€¨
When starting to consider what to do with the 2013 crops not already priced, I first look to the markets and calculate what carry may be available.
Of course, it may be way too early for selling the carry on the expected harvest, but I believe it is never too early to formulate the beginnings of a plan.
If we get started thinking we are less likely to be surprised and caught off guard when the time does get here to market some more of our 2013 harvest.â€¨â€¨
‘Carry’ in commodity marketing refers to the difference in price bids for two different delivery months — any two months.
Looking at the Salisbury, Md. market quotes today as an example, we see the following offers:â€¨â€¨
• Harvest corn delivery — $5.87â€¨;
• January corn delivery — $6.13â€¨;
• February corn delivery — $6.18â€¨;
• March corn delivery — $6.23â€¨â€¨.
This shows there is currently a positive carry in the corn market at Salisbury. Any future delivery month is offering a higher price than earlier deliveries.
As an illustration from the above bids, I calculate a $0.36 carry between harvest and March delivery.
Positive carry indicates the market is expecting a somewhat large harvest. At least large enough that our buyers want us to go ahead and store much of it and bring it to them later in the marketing year.
A positive carry suggests buyers are not necessarily concerned with securing adequate stocks over the coming year of usage.
A positive carry does not suggest higher prices in future months. It suggests we may be able to secure a return to storage.â€¨â€¨
The size of the offered carry helps us determine if we can capture a significant return to our storage enterprise. Carry large enough to cover shrink, quality deterioration, risk and interest costs incurred during storage months may be a signal to go ahead and take today’s future delivery bid, store the crop and make delivery at the agreed upon time.â€¨â€¨
I continue to watch weather reports and consider impacts on harvest potential, and thus 2013 prices.
It is still way early in the U.S. growing season to make too many firm harvest guesses. The acres are more or less planted and it remains a supply question for now.
Politics and policy, world events and alternative investor opportunities may also be worth a look as we gauge where our prices might go.
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