Fall is the time of year when corn and soybean farmers get to see if our hard work and expenses have paid off. You put in many long hours throughout the year, run several different "tests" in fields, and endure a handful of sleepless nights and bad weather, hoping to make some money when harvest time comes around.

Right now we're trying to make money on a corn crop that has dropped more than $1.30 in price since January.

Selling this year’s corn crop hasn’t been easy. From the beginning, expenses were elevated for the 2023 crop, making breakeven prices higher than in previous years. December new crop futures were at $6.11 on Jan. 3, and they only traded above that mark on three occasions later in the year (June 21-23).

Is storage the answer?

Many will consider putting their crop into storage this year, hoping for an increase in price that outweighs costs. They may be thinking, "Why not if you can participate in a post-harvest rally -- and the price can't keep going lower, right?"

However, this type of thinking has gotten others into trouble before and will continue to do so in the future. Maybe storage has worked out in the past, but it's best to consider another option before pulling the trigger.

Let's compare putting your corn into commercial storage versus making a cash sale off the scale and buying a call option. Consider:

Let's look at the numbers to compare commercial storage against a cash sale paired with a call option.

Storage rates for corn vary by elevator, but typical rates in the corn belt may include an 18 cent "drop fee" and then 4 cents a month after that. Some elevators will also charge for drying and shrink your corn down to 14% instead of 15% when putting it into storage; that costs an additional 5 cents even as you lose an extra 2.8 bushels on 200-bushel corn. That shrink is $12/acre or another 6 cents per bushel. All together, if you want to put corn into storage until December, you are going to be paying 41 cents (the 18 cent drop fee, 5 cents for drying, 6 cents for shrink, and 12 cents for 3 months of storage).

The kicker is that if the corn market drops in price, you lose on that too.

Comparatively, the fees for a call option are quite simple. At the time of this writing, an at-the-money December $4.75 call is 16 cents. Add a broker's fee of 3 cents to get a total cost of 19 cents to have upside potential until November 24th.

With December futures currently at $4.75, here are some price scenarios to put the numbers to the test:

Clearly, in all these scenarios, a sale with a call is the better route to take.

What about basis?

Storage can take advantage of one aspect that a sale with a call can't: improvement in basis. But in any of these situations, you need basis to improve at least 22 cents to break even. The risk does not seem worth the reward in my mind.

You can buy calls to extend your timeframe, or you can start with a December call and roll it out to a longer term later. Calls give you great flexibility to participate in a rally but limit your risk substantially.

So, this fall, when you have delivered on all your contracts, filled your bins, and have to do something with your "extra" bushels, consider using call options. The numbers speak for themselves. Enjoy this fall season and have a safe harvest!

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