Cash Crunch Hits U.S. Wheat Elevators As Futures Soar – for Aug. 12, 2010

Surging futures prices have U.S. farmers smiling but have left many grain elevators facing a cash crunch.

As futures prices soar to levels not seen in over a year, farmers have been selling their newly harvested winter wheat bushels at a faster pace than usual, leaving elevator operators that have hedged their purchases with futures with large margin calls.

“It’s a good thing for the producer to have an opportunity for price gains at a higher level, but it throws some stress on the elevators,” said Oklahoma-based Hydro Co-op Association manager L.G. Gilbert.

The pricing action is tied to a drought in Russia.

Still, a persistent wide divergence between U.S. cash wheat prices and futures prices continued to be noted through the country.

Both companies said the merger would deliver cost-savings of more than $40 million a year.

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