Comment Text:
We are in favor of increasing the storage rate. However we would like the market to determine whether or not 8 cents/mo is enough return to cause convergence. Our suggestion would be to run an observation period for Dec/March corn the same way you would VSR in wheat today. It would not have to be every delivery period, but maybe just once a year. 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.
