A new report from CoBank says grain merchandisers have endured rising costs of storing or carrying grain and oilseed inventories during the past year because of rising interest rates. Higher crop prices and rising operating costs like transportation, insurance, fuel, electricity, and labor are also squeezing grain elevators.
CoBank forecasts the financial cost of carry will reach record highs in the upcoming 2023-2024 crop year for corn, wheat, and soybeans. Grain elevators are required to buy and market members’ crops, regardless of whether the economics are favorable. The one thing elevators do control is their local bids. Inverted futures markets further penalize elevators for having to store grains and oilseeds.
If interest rates stay at their current high level and futures markets remain inverted into the new crop year, then many grain cooperatives are expected to lower their bids and widen their basis to cover the high cost of storing commodities.