  This paper studies the market phenomenon of non-convergence between futures
and spot prices in the grains market. We postulate that the positive basis
observed at maturity stems from the futures holder's timing options to exercise
the shipping certificate delivery item and subsequently liquidate the physical
grain. In our proposed approach, we incorporate stochastic spot price and
storage cost, and solve an optimal double stopping problem to give the optimal
strategies to exercise and liquidate the grain. Our new models for stochastic
storage rates lead to explicit no-arbitrage prices for the shipping certificate
and associated futures contract. We calibrate our models to empirical futures
data during the periods of observed non-convergence, and illustrate the premium
generated by the shipping certificate.
