Comment Text:
I feel, as general manager of Earlville Farmers' Co-op in Earlville, Illinois, that premium charges should be increased. I believe it will allow grain elevators to be more financially stable in an industry that relies heavily on export market demand.
When export demand for corn and soybeans lingers for an entire fiscal year and beyond, and the nearby futures price remains within a 1 dollar trading range for an entire fiscal year; farmers use country elevators to store the excess, previous year's grain that they do not want to sell. Many elevators only have the storage capacity to store 115% of an "average crop". When country elevators enter the harvest season already 25% full due to the increased farmer owned grain, they must take expensive measures to meet customer demands. This being either creating more expensive temporary space, or shipping poor margin, hedged grain in times of poor seasonal demand. There also may be additional carryout grain because elevators purchased grain from a producer, sold CBOT corn futures, and basis never improved due to low corn demand. Therefore, in order to make a margin on the grain, elevators must carry additional company owned grain into the following fiscal year.Along with ever increasing corn and soybean yields due to advanced agronomy science, these more expensive warehousing practices have become more prevalent in the grain warehousing industry because without utilizing them, grain elevators would be full with harvest only 70 - 80% complete.
Increased premium charges allow grain warehouses to be more financially rewarded for having to physically store grain for longer than expected periods of time. Grain that is purchased from producers and sold on the CBOT, would bring a better financial return to the warehouse when being rolled from the current futures month to deferred months with increased premium charges. This would be healthy for the grain warehousing industry as a whole.
