More on DP Contracts
Yesterday, we wrote about a “dump” charge on DP grain. Several folks asked what was a “dump” charge? We have not commonly seen dump charges since the large supplies of the 2016 when the US produced 15.148 billion bushels and the carry-in (left over from the previous marketing year) was 1.737 billion, a 46 day supply. When it was all said and done, the 2016 corn crop carryout was 2.293 billion bushels, a 57-day supply.
Presently, the USDA projects the 2023 crop will be 15.134 billion bushels with a carryout of 2.221 billion bushels, a 56 day supply. It looks like this 2023 corn crop will be the third 15+ billion bushel corn crop.
When supplies are large enough to create storage space problems, the basis weakens. When the futures and basis are weak, most farmers want to store their grain, but most farmers do not have enough storage space on the farm to store all their grain, especially in a big crop production year.
In order to be in a position to capture a price recovery, there are five alternative tools: