Cooperative weather has many portions of the Midwest looking to potentially grow a record corn crop this year. Where will all that corn go come harvest time? If you’re planning to store harvested corn at home in bins this fall and winter, this blog is for you.
What’s happened
Corn futures prices have struggled to rally this spring and summer due to higher planted acres and wonderful weather, potentially making the notion of ample supplies a reality. Corn prices have been on a down trend since late February.
Farmer selling for new crop cash corn has been limited due to unattractive, low prices. In an environment like this, many farmers find it difficult to get excited about forward pricing corn for harvest delivery.
With prices unattractive, many producers are already starting to think ahead about storing this fall’s harvested corn and waiting for a potentially better pricing opportunity at some point this winter.
From a marketing perspective
Whatever your reason for choosing to store your newly harvested corn, storing corn—whether at home or at the local grain elevator—carries cost. Costs can come in the form of monthly storage fees, drying costs and interest costs.
One strategy to help pay for costs is to sell out-of-the-money call options. Let me be clear, this strategy is not for everyone and comes with potential margin risk should there be an unexpected rally.
Yet, in challenging an environment where the notion of a big corn crop may continue to weigh on corn prices for quite some time, it may be for corn prices to rally. Prices could trade in a sideways fashion for months until the crop is fully harvested and the size of the crop is understood.
Let’s review how call options work. If you buy a call option:
- You are hopeful or thinking a rally for corn prices may come at some point in the future.
- You have the right to be long futures at the strike price purchased.
- You pay the option premium required (plus brokerage fees) and do not face margin call risk.
Call options are considered out of the money when the strike price is above the current futures price. For example, if March 2026 corn futures are trading at $4.40, a March 2026 $5 corn call is considered “out of the money.”
A person who purchased a $5 corn call has the right (not the obligation) to own corn at $5 on March futures. The buyer is hoping that corn prices will rally 60 cents up to that $5 price level.
Due to this potential large crop, if you are skeptical of a rally of that magnitude—and think it might be a challenge for March 2026 corn futures to rally up to that $5 price point—then you might consider selling that call option and collecting the option premium (less brokerage fees).
So, who can sell an option? Anyone can who has a brokerage account and is able to meet the financial requirements. If you sell an option, you collect the premium (paid by a buyer) and you guarantee the buyer (owner) of that option the right to turn this into a long futures position at the option strike price.
Risk incurred when selling options is potentially unlimited should the market rally!
The exchange recognizes risk by requiring an initial margin (good faith payment) and potential additional funds called maintenance margin. The reality is that the seller of an option has limited profit and unlimited risk. If you’re reading this, you might be wondering why this might be an idea to consider since it has margin risk?
If you have grain in the bin, you also have unlimited risk. If you sell a call option against stored grain, the call option gains value (a risk for you) only if the futures market rises. The positive implication is that your cash grain being stored in your bins can also gain value.
So, while you may have the risk of a margin call to maintain the sold call position, you also have the benefit of stored grain potentially increasing in value. If the futures price at expiration is below the strike price of the sold call, the call would expire without value and the premium (less brokerage fees) would be fully collected.
Prepare yourself
The market is unsure right now where final corn yield will end up. If yield is near the current USDA projection of 181 bushels per acre or lower, corn futures could rally higher into late fall and winter. However, if this crop is as big as some in the industry are projecting, it may be a struggle for a rally to occur.
Keep in mind, you fully need to understand the potential risk associated with this strategy. The strategy of selling call options is not for everyone. For those who are willing to challenge the market to move higher in price, this may be an excellent way to collect a premium, which helps finance the cost of storage.
Reach Naomi Blohm at 800-334-9779, on X: @naomiblohm, and at naomi@totalfarmmarketing.com.
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