Post-harvest Grain Marketing with Efficient Futures

This study is a simulation that tests whether Kansas wheat, corn, milo (grain sorghum), and soybean producers could have used deferred-futures-plus-historical-basis cash price expectations to profitably guide post-harvest grain storage decisions from 1985 through 1997. The signaled storage decision is compared to a representative Kansas producer whose crop sales mimic average Kansas marketings. Twenty-three grain price locations are examined. The simulation resulted in a 15 cent per bushel annual increase in grain storage profits for wheat producers, 23 cents for soybeans, -6 cents for corn, and -8 cents for milo; but storage profit differences varied substantially across locations. Inferences for random Kansas cash price locations were robust to alternative basis expectations, marketing year starting dates, model starting dates, interest rates, and storage cost structures.