A quick worked example
Say December corn is 4.50 at harvest and July is 4.86, offering 36 cents for eight months of storage. Your interest at eight percent on 4.50 runs about 24 cents for that period, on-farm storage costs another few cents, and shrink and insurance add a little more. The margin is thin but positive, and if your basis typically improves another 15 cents by spring, the total return to storing priced grain becomes worthwhile. Now flip it: if July were 4.52, the market pays two cents and the answer is sell. Same bins, same grain, opposite decision. That is why the spread, not the price level, drives the choice.
Reading the spread
Corn storage costs money: interest on the grain's value, physical storage or elevator charges, insurance, and shrink. In a market with comfortable supplies, deferred futures trade above nearby futures by roughly those costs. That premium is the carry. A full carry market pays close to the entire cost of storage; a partial carry pays some of it.
The spread between contract months is the market's storage bid, visible to everyone. You do not need to forecast prices to read it. December-to-March and December-to-July are the spreads corn producers watch most, because they bracket the harvest storage decision.
Putting it to work
- Compare carry to your cost. If the spread pays 20 cents and your storage cost is 12, storing with a price locked earns the difference. On-farm storage usually captures more of the carry than commercial storage.
- Lock it or lose it. Carry is only real money if you price the deferred month, by selling futures or forward contracting for later delivery. Storing unpriced grain while watching the spread is speculating, not capturing carry.
- Respect the inverse. When nearby trades above deferred, the market wants grain now and is penalizing storage. History says sell into inverses rather than wait them out.
- Basis still matters. Post-harvest delivery bids also reflect basis recovery, which can add to what the futures spread alone shows.
What carry is telling you
Big carry means the market is comfortable with supply and wants grain stored. No carry or an inverse means scarcity, and the market wants your bushels immediately. Either way, the spread is information you get for free. Futures trading involves substantial risk of loss and is not suitable for all investors.