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Did You Know? CME Storage Rates for Wheat Can Fluctuate Based on Futures Spread Performance
Did you know the storage rate set by the CME Group for wheat can change based on the futures spread performance?
Background: The CME Group has set ‘storage rates’ for all commodities that are used to calculate financial full carry. Knowing the financial full carry compared to what the physical commodity can be sold for in the cash market is key in managing futures spread risk.
The corn and soybean set storage rate is currently 8 cents per bushels per month. You would then add interest costs to this to determine financial full carry. For Chicago Soft Red Winter Wheat and Kansas City Red Wheat futures contracts the storage rate can fluctuate. This fluctuation is based on the nearby spread’s performance, and is referred to as the Variable Storage Rate (VSR) method. The VSR system was created to help aid in the convergence of the wheat futures and cash markets.
More information can be found here:
Bailey Elchinger is a Grain Risk Management Consultant and Regional Director at StoneX Financial Inc. in Bowling Green, Ohio. She also serves on the OABA Board of Directors. If you have additional follow-up questions regarding wheat VSR please feel free to contact her at bailey.elchinger@stonex.com.
