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GRAIN CONTRACTS
Cash Contract
- Sell grain at cash price to specified delivery location
- Picked up cash bids, includes freight in price of bid
Basis Contract
- Set basis, bushels, delivery location and month
- Futures price set later
- MINIMUM of 5,000 bu. contract
Minimum Price
- Allows farmer to establish a minimum price with gains in upside market movement
- Set bushels and take cash price for chosen delivery period
- Farmers Co-op attaches a call option to cash order (Farmer specifies strike price and contract month)
- Farmer pays option premium and can sell or exercise call option prior to expiration
- If the call option is sold back, farmer receives complete amount from sale of option
- Under a Minimum Price Contract, the call option portion could expire worthless
Deferred Pricing
- Deliver grain to elevator to price prior to end of July
- Title of grain is transferred over to elevator
- No cost to the farmer through July
- OLD CROP ONLY!
- This no cost option is seasonal based on space
Hedge to Arrive
- Set futures price, bushels and delivery period
- Set basis later – can be set prior to delivery, but first bushel of grain applied to HTA sets the basis if not set prior to delivery
- After basis is set, HTA is converted to a Cash Contract
- Prior to basis being set, farmer can roll HTA to a deferred month (.02 cent/bu.commission will be charged)
- Preferred minimum of 5,000 bu. contract (mini contracts increase cost)
- HTA fees on 5000bu. or greater contracts are .05
for 2010 contracts, .10 for 2011, and .15 for 2012. Mini contracts
are .085.
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