By Carl Zulauf and Nick Paulson et.al
This article begins a set of three articles on storing corn and soybeans, a topic of current interest given the size of 2025 US crops (see, for example, Wicks). This article specifically examines long term trends in the cost of storing corn and soybeans. Total storage cost changed little from 1974 through 2005, then moved somewhat higher between 2005 and 2020. Declining interest rates and thus interest opportunity cost of storage mostly offset increasing physical storage costs. Since 2020, interest opportunity cost and physical storage cost have both increased, resulting in higher total storage cost. These storylines underscore the important role of interest rates, thus interest opportunity cost, in offsetting or reinforcing on-going increases in physical storage cost. The reinforcing role has been noticeable since 2020.
Procedures
Starting this study with the 1974 marketing year postdates the increase in price variability that occurred in the early 1970s (Kenyon, Jones, and McGuirk). The study ends with the last complete marketing year, 2024. Cash price is the average monthly price paid to US farmers by first handlers as reported by USDA (US Department of Agriculture), National Agricultural Statistics Service. Storage starts in October, the month with the lowest average cash price. Storage cost includes (a) physical storage cost at commercial facilities to keep the crop in useable condition and (b) interest opportunity cost of storing instead of selling at harvest. Annual physical storage cost is from USDA, Commodity Credit Corporation through the 2005 marketing year. Thereafter, it is for an Ohio country elevator, cross checked with another first delivery point in Ohio. Interest opportunity storage cost is calculated by multiplying (a) the October US cash price times (b) the average one year US Treasury bill rate quoted on an investment basis for October as reported by the Federal Reserve Bank of St. Louis.