UIUC Weekly Outlook: Economics of Corn and Soybean Storage

Storing corn and soybeans unpriced implies the expectation of prices increasing by more than the cost of owning and storing these crops. Higher prices may only be forthcoming if the concerns about the U.S. and European economies can be overcome. In the short run, that might require much smaller production forecasts by the USDA on Sept. 12 and/or Oct. 12, he said.

"However, the market is already anticipating some reduction from the August forecasts so actual reductions would have to be surprisingly large," he said.

In the longer term, higher prices might occur if demand is stronger than currently forecast, requiring further rationing of consumption, he said.

"Surprising demand strength might have to come in the export markets if the domestic economy remains weak. Southern hemisphere crop problems or larger-than-expected corn exports to China might be required to provide the demand boost. Time will be required for those developments to unfold," he noted.

Corn and soybean prices are at high levels and are facing some strong headwinds. High prices and generally strong basis levels reduce the potential returns to storage, Good said.