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Elevators expected to see record cost of carry in ‘23

A new report from CoBank shows that the cost of storing grain for elevators has hit record highs and that’s a mixed bag for the ag industry.

Economist Tanner Ehmke tells Brownfield higher interest rates, in addition to more expensive labor, transportation and energy will force elevators to lower bids and widen basis. “Although you may see for instance rising prices on the CME in futures markets, what you may see in your local cash market is your local basis may be slow to follow any rise in futures markets.

CoBank’s Knowledge Exchange says the cost of carry in the 2023-2024 crop year will jump 21% for corn, 42% for soybeans and 50% for all-wheat.

But, Ehmke says grain will be cheaper for end users. “If you’re feeding cattle or hogs or chickens, or if you’re an ethanol plant that is sourcing grains and oil seeds or wheat from local co-ops, there’s an opportunity here for them to benefit from wider basis.”

And, he says, the cost of storing commodities will vary. The projections are based on 7.75 percent interest rates and USDA”s average price forecasts of $4.80/bushel for corn, $12.10/bushel for soybeans and $8/bushel for wheat.