Grain elevators and cooperatives are facing increased financial pressure as strong farmer selling shifts more grain ownership and market risk to commercial handlers, according to CoBank. The bank’s Knowledge Exchange says recent rallies in corn, soybean, and wheat markets have encouraged producers to sell grain, leaving elevators holding larger inventories amid elevated interest rates and transportation costs. In many areas, elevators expect to own nearly half the local corn and soybean crop after harvest, compared with a more typical 35 to 40 percent. CoBank economist Tanner Ehmke says larger inventories require more working capital, while volatile prices create additional financial risks. Elevators often hedge owned grain with short futures positions. But when prices rise, those positions can trigger immediate margin calls, requiring cash payments before the physical grain is sold. Limited futures-market returns for storing grain may also fail to cover financing and storage costs, adding further pressure to grain merchandisers’ margins.
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