Grain

A contract with a fixed (final) price for a specific delivery requirement. This contract is also referred to as a “flat price” contract.

Advantages:

• Quantity and price is fixed, with no further price risk.
• Quality risk is passed to buyer.
• Money is immediately available.

Disadvantages:

• Pricing flexibility and delivery are eliminated.
• No chance for further price increases.

*Offerings subject to change without notice. The above contracting tools involve market risks and may not be appropriate for all producers.

This is a formula price contract. The formula to determine price is: basis + board of trade price. At the time of contracting, the basis is established, and final price is then determined when the board price is set. Board price must be set prior to expiration date in the contract. BF contracts may be rolled forward to another board contract month, at the spread between the futures months, plus a fee for a contract change.

Advantages:

• Downside basis risk is eliminated.
• May take advantage of future CBOT rallies.
• May avoid a weak (harvest) basis or low flat price.
• Can receive an advance of 50% of contract value (ex. $2.00 cash price: advance $1.00 per bu.).
• Quality risk passes to buyer.
• Avoids storage or price later charges.
• No minimum bushel requirements.

Disadvantages:

• Future basis improvements cannot be realized.
• You remain subject to the risk of changes in the CBOT futures prices.
• Requires knowledge of local historical basis.
• There is risk in FC asking for additional equity in case cash values fall below advancement levels.

*Offerings subject to change without notice. The above contracting tools involve market risks and may not be appropriate for all producers.

This is a formula price contract. The formula is: basis + board of trade price. At the time of contracting, the board price is established, and final price is then determined when the basis is set. The basis must be set prior to time of delivery or before the contract expiration date.

Advantages:

• Takes advantage of high futures levels, leaving opportunity for basis to improve.
• Futures downside price risk is eliminated.
• No margin calls or exchange fees and can eliminate storage costs.

Disadvantages:

• Open to basis-level widening.
• Cannot take advantage of futures rallies.
• Cannot trade in and out of HTA contracts as with futures contracts.
• The title of the grain is transferred.
• The delivery of the contract is mandatory.
• Payment is not received until basis is set and the grain is delivered.

*Offerings subject to change without notice. The above contracting tools involve market risks and may not be appropriate for all producers.

This contract establishes a guaranteed “minimum” price, while also allowing the contract to be “re-priced” at seller’s option, if market conditions allow. The final price will be the minimum price plus a formula (established in the contract) increase, if and when re-priced.

Advantages:

• Risk of price decline for both basis and CBOT is eliminated.
• Upside CBOT potential is not restricted.
• The minimum price is guaranteed and paid in full upon completion of delivery.
• Requires no upfront charges, fees or margin money.
• May cost less than commercial storage rates.
• Quality risk passes to buyer upon delivery.
• Premiums are based on CBOT traded futures options.
• Very safe and the costs are easily identified.

Disadvantages:

• Does not permit trading in and out of markets as delivery is expected.
• Depending on option prices and volatility, it may cost more than storage rates.
• The basis is locked in, so one cannot participate in further basis improvements.
• Requires selling 5,000-bushel increments.
• Pricing must be done before deadline or premium is forfeited.

*Offerings subject to change without notice. The above contracting tools involve market risks and may not be appropriate for all producers.

Producers may enter into an agreement, whereby they make firm “offers” to enter into a cash grain contract with Wheat Growers. We will then “accept” that offer if market conditions allow.

Advantages:

• Price targets can be reached if you are not able to monitor the markets minute by minute.
• Takes advantage of short-lived day rallies, if your offer is in the quote system.
• If you have a price goal in mind, it puts it in writing and gives you something to watch and monitor.
• Any price amount and bushel quantity can be offered.
• Offers can be used to price cash, storage or new-crop delivery grain.
• Offer to sell may be cancelled by seller anytime, providing notice has been received by buyer prior to offer being filled.

Disadvantages:

• The grain will be priced at an offer, and if the market rallies past the set offer, additional gains will not be realized.
• Putting offers to sell at even dollar amounts can sometimes be costly. An example is an offer to sell $2.00 corn, and the price is $1.99; then the market falls to $1.50. Fails to “pull the trigger.”

*Offerings subject to change without notice. The above contracting tools involve market risks and may not be appropriate for all producers.

This contract allows a producer to move grain to a Wheat Growers location without establishing any price. Charges vary with market conditions.

It is important to note that, unlike storage, title to the grain passes to the buyer upon delivery. Producers will not be able to use price later grain as collateral for government loans or Loan Deficiency Payments (LDP). Service charges are based on market differentials (carries/inverses) and may or may not be less than storage charges.

Click here to view Wheat Growers DP options per commodity.

Advantages:

• Can make delivery while avoiding historically low (harvest) prices.
• The emotionalism of pricing is separated from the physical handling of the grain.
• Do not need on-farm storage, and price later may be cheaper than commercial storage.
• Quality risk passes to buyer upon delivery.
• On free price later, it allows producers to move grain when they have time; then they can sell it in any bushel amount, when they decide.
• Corn is shrunk to 15% moisture vs. 14% on storage and warehouse receipts.

Disadvantages:

• Subject to basis and CBOT price risk.
• No payment until contract is priced.
• This is not STORAGE! Title passes to buyer and you are unable to get a CCC loan or LDP once put into price later.

*Offerings subject to change without notice. The above contracting tools involve market risks and may not be appropriate for all producers.