Ever talk to farmers from a different part of the country and marvel at their strong basis? Corn bids this summer in North Carolina’s barbecue belt ran $1 a bushel or more above those in Iowa, even though hog inventories back East stagnated, while those in the Midwest rose to record levels.
Yes, more critters mean more corn ground for feed, and demand is important for prices. Strong usage can force end users to pay a premium to obtain what they need — if supplies are scarce.
But this year, stocks likely aren’t in short supply. Unless weather slashes production here or elsewhere around the world, feed inventories are plentiful.
Still, supply and demand are only one step in the basis minuet. Transportation costs and interest on loans complicate the dance. But mastering the moves can increase your price — without leading your operation in a transcontinental pirouette to the Eastern Seaboard.
Sure, choreographing the trading of profits sounds simple: Buy low, sell high. The actual steps are a little more complicated. One foot follows Chicago corn and soybean futures, while the other sets the real value in the cash market. The size of the stride is basis, whether you’re dancing a waltz, foxtrot or tango.
Money matters in this routine because it isn’t free: Higher interest rates increase loan charges for debt incurred by storing grain and not converting it to cash through sales to merchandisers or end users, or forgone by not investing proceeds.
Shipping costs for trucks, railcars and barges also work into the formula. Deliveries in the futures market are still mostly theoretical, but their potential acts as a reality check for traders. Grain must be moved into position to load out against futures, making transportation expenses important for basis.
And even if you don’t trade the contracts, exchange-traded futures and options can be a valuable marketing multi-tool.
Spreads between futures contracts for different deliveries can tip off vital actions needed in the cash market. They can also improve basis and even act like a poor man’s put or call option.
Make no mistake: Trading spreads is not without risk, as the fine print on disclosure documents makes clear. The difference between futures contracts for delivery months of the same commodity varies, sometimes widely, depending on market conditions like supply and demand, as well as rules at the CME Group.
What to watch
Two types of spreads are useful:
- between months in the same marketing year
- between different crop years
December corn and November soybean futures are typical benchmarks because most fields are harvested before the contracts wind down. July futures are a good place to start for measuring spreads. One compares months in the same marketing year; the other looks at one crop to the next. Here’s how it works.
This summer, July 2026 corn futures were priced greater than 30 cents more than December 2025, or about 4.2 cents a month. Most years, that’s about average for the start of December deliveries after harvest. But it’s far less than the cost of commercial storage in most markets.
Whether it’s enough to justify putting corn in bins on the farm depends on your calculations of full financial carry, which vary from farm to farm. These include depreciation on facilities, costs for handling and keeping grain in condition, and interest.
Short-term rates around 5% on $4.50 corn amount to 13.125 cents for December to July. Labor and energy add another 2 cents a month for handling. What would it cost to replace your facilities? These capital charges, in part, depend on the price of steel, another pingpong ball in the battle over tariffs.
Spreads for both crop years typically post extremes in the spring or early summer. That helps make them a surrogate for options.
Early warning system
Big changes in spreads can also work as a tipoff that something is up. When the flash drought took hold in 2012, new-crop December surged some 57 cents in just two days, while old-crop July gained a “mere” 33 cents. These moves suggested traders were more worried about new-crop availability than securing old-crop supplies.
The rally in 2012 crop futures offered a chance to lock in record selling prices. Whether that price was profitable depended in part on how spreads — the market’s multi-tool — performed.
5 marketing options for selling corn
In the parlance of the market, farmers are short the futures and long the basis, whether pricing old crop or new, before or after harvest. So, selling corn with July 2026 futures or hedge-to-arrive contracts doesn’t net a price more than harvest unless basis strengthens enough.
Consider five options a grower faces harvesting 2025 corn:
- Sell off the combine and move on.
- Put the grain in storage, either on or off the farm.
- Sell off the combine and cover upside potential by buying futures or a call option.
- Lock in a futures price by selling July and waiting for basis to strengthen.
- Cover downside risk by buying a put option to protect corn in storage from a weaker market.
Hindsight is 20-20, but it’s useful to look at years of extremes. Here’s how the options played out in 2012’s drought:
Option 1. Selling corn at harvest in 2012 earned an average cash price of $7.54 at locations covered by a Farm Futures storage strategies study.
Option 2. Storing corn reaped an average price 20 cents lower when July options went off the board toward the end of June 2013. Harvest sellers also incurred no costs for storage.
Option 3. Selling cash and keeping a leg in the market by buying futures or a call option also saved storage expenses, but lost even more because futures faded from harvest into summer 2013. Futures lost nearly 85 cents. An at-the-money July call cost a premium of more than 65 cents — all of it lost because the option expired worthless.
Option 4. Selling futures instead of buying them gained that 85 cents. And while average cash prices were 20 cents lower the following summer, basis improved some 72 cents. This so-called storage hedge incurred costs for putting the grain in a bin but still netted a price 29 cents better than harvest.
Option 5. Covering inventory with a July put near the market at harvest was expensive, around 70 cents. The option expired in the money for a profit of some 18 cents — not enough to cover storage charges but better than storing the corn and waiting until summer to sell it.