The word “carry” is used in many different contexts in our world, but all of them involve an action. That is also true of its use in the market. No one should understand this better than farmers who own grain bins. However, and unfortunately, many do not. There is a cost to storing corn. While some may try to dispute this, it is a fact.
Commercial grain elevators make a business out of managing carry. Carry, as defined, is nothing more than what the market is paying you to store grain from the point of harvest to some time in the future. When storage is short in town, and the crop coming out of the field is large, the market often incentives people with storage by growing the carry spread, or the difference between the current price and the prices available in future delivery periods.
At other times of the year, that spread may be narrower. That is especially true as markets are rallying. In shortage environments, there may actually be a discounted price for future delivery, or what is known as an inverted carry. This is the markets way of saying “We want it now”. Proper management of the carry spread can add great value to your marketing efforts.
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