Commodity Futures Deliveries: Theory and Evidence From the US Corn Market

For corn futures, deliveries facilitate convergence by allowing for arbitrage between physical and “paper” markets. We explain the delivery process in detail, including the key role of Shipping Certificates. We investigate what drives deliveries and their timing and the feedback on futures prices when deliveries happen. We introduce the concept of delivery-value-equivalent (DVE) to understand whether a trader should “go for delivery.” We show theoretically and empirically, for 51 delivery periods in 2011–2021, that the difference between the DVE and the New Orleans basis is a significant factor in explaining the occurrences and magnitudes of deliveries. We document that physical market conditions and inventory levels (proxied by the cost-of-carry) explain deliveries' timing within the delivery period, and we investigate if registering new Shipping Certificates depresses the nearby futures price. We propose a public information-based proxy for redeliveries and provide evidence that redeliveries weaken the nearby calendar spread.