Comment Text:
We would suggest increasing storage costs to allow for more routine
convergence and better reflect today’s higher costs structures of warehouse space. While the
current proposal to increase standard storage 3 cents/bu per month is a good start, we’d prefer
to see a hybrid approach that allows the market to have a bit more say. Call it an annual review;
one observation period a year (not every delivery period like the VSR). Initial suggestion would
be Dec/Mar for corn and Nov/Jan for soybeans. For example:
Run an observation period for Dec/March corn the same way you would VSR in wheat today.
Start a weighted average based on the Dec/Mar spread close, beginning at the expiration of the
Sept contract and running through expiration of Dec options. If the spread averages above 80%
of full carry, storage would increase from 8 cents/mo to something higher (say 11 or 12
cents/mo) for the subsequent year. Otherwise it would remain at 8 cents/mo. The same
exercise could be run during that time frame each year.
