Forward Cash Sale Contract

 The Forward Cash sale contract is made ahead of delivery when the flat price is at or above the Cost of Production, locking in the cash price = (Futures + Basis).  The producer will be required to deliver a specific quantity and quality of grain in a specified date range and location.  These types of agreements are typically made ahead of planting or anytime during the growing season.  Bushels contracted ahead of harvest must be in 1,000 bushel increments.

 Pro’s:

• Stops storage when bushels are applied against the contract.
• Locks in cash price and bushels.

 Con’s:

• Title of grain transfers to the Buyer.
• Loss of any gains in Futures and Basis.

The Cash Grain Sale Contract

 This is simply the selling of grain typically across the scales, when the cash price is at or above a producer’s Cost of Production. 

 Pro’s:

• Stop Storage
• Locks in a cash price
• No required minimum bushel requirement

 Con’s:

• Title of grain transfer to the Buyer.
• Loss of any gains in futures and basis.

Extended Price Contract

 The Extended Price Contract is a cash contract allowing the producer to sell grain at a 70% advance rate of the cash price, less fees, while maintaining an upside participation in the Futures market with a long futures position established upon delivery of the grain.  At the time the sale is made the producer chooses the Trading Month and the amount of Risk Capital.  Midland will offset the long futures position with an Open Stop Order equal to the amount of Risk Capital.  Bushels contracted must be in 5,000 bushel increments.  For more details, please call your Midland Marketing Grain Team Member.

 Pro’s:

• Immediate cash payment at the advance rate, less fees on delivery.
• Participate in futures rallies.
• Stop’s Storage for those bushels applied against the contract.
• Flexible regarding risk, capital and time.
• The Extended Price Contract can be rolled into a deferred trading month within the current crop year.

 Cons:

• Title of grain transfers upon signing of the contract.
• Delivery is required to the specified location.
• Risk Capital may be lost if stopped out of the futures market.
• Lose potential gains to Basis.  

Basis Contract

 The Basis contract is a marketing tool that locks in the Basis side of the cash price for a specific delivery period and allows the setting of the Futures price at a later date.  This contract can be a useful tool when the Basis is weakening or Basis is at a historically high level, and futures are starting to rise.  The Basis contract can be rolled into a deferred trading month within the current crop year. 

 (Futures + Basis = Cash Price)

 Pro’s:

• Eliminate the widening basis risk.
• The producer participates in futures market rallies.
• Stops storage for those bushels applied against the contract.   
• The Basis Contract can be rolled within the current crop year that adds time value.
• No restrictions on bushels contracted that are Stored on the farm or at the elevator.

 Con’s:

• Basis improvement cannot be realized.
• The Futures price could continue to weaken within the specific delivery and pricing period.
• The Basis Contract is priced automatically on expiration, unless the producer sets futures or requests the contract be rolled.

Hedge to Arrive Contract (HTA)

 An HTA contract is a marketing tool that locks in the Futures side of the cash price for a specific Trading Month and the Basis can be set at a later date.  This contract can be a useful tool to help manage market volatility or when futures are a strength, providing time value for Basis to strengthen.   The HTA contract can be rolled into a deferred trading month within the current crop year.

 (Futures Price + Basis + Fee = Cash Price)

Pro’s:

• Takes advantage of high futures levels, leaving opportunity for Basis to improve over time.
• Futures downside price risk is eliminated.
• No margin calls.
• Stops storage for those bushels applied against the contract.
• Midland allows the producer to roll an HTA contract within the current crop year.

 Con’s:

• Open to Basis level moving wider.
• Can not take advantage if futures rally.
• The delivery of bushels is required.
• Payment is not received until the Basis is set.  

Minimum Price Contract

 The Minimum Price contract is a cash contract that establishes a guaranteed cash floor price less market fees, providing the opportunity to participate in the futures options market.  The final price will be the minimum net cash price plus any gain in value of the Call or Put Option above breakeven that must be exercised prior to the expiration of the option contract.  Delivery is required before settlement. 

 (Minimum Cash Price = Futures + Basis + Market Fees)

 Pro’s: 

• Receive minimum cash payment on total bushels delivered.
• Stop Storage for bushels contracted.
• The Call option provides time value and the opportunity to take advantage of higher futures prices.
• Conversely the Put option contract provides time value and the opportunity to gain value in a weakening futures market.
• The Options Contract whether a Call or Put Option gives the option purchaser the right, but not the obligation, to buy a futures contract at a predetermined price before the option contract expires.

 Con’s:

• Title of grain transfers to the Buyer.
• The loss of the Premium and fee paid.
• Loss of basis gain.
• Traded Option contracts are in 5,000 bushel increments.

Min/Max Contract

 The Min/Max contract let the producer establish a minimum price protecting against a lower price but allows participation should the market rally higher up to the predetermined maximum price using exchange traded option contracts.  The final price of the Min/Max contract will be the minimum price, less premium and broker fees, plus any value the option positions may provide, if the market is above the minimum price prior to the expiration of the option contract.

 Pro’s:

• Provides a minimum pricing floor.
• It has a reduced cost when compared to other Option contracts. The minimum price contract as it offsets high option premiums in exchange for a ceiling above the market. 
• The seller can set the final price at any time during market trading hours.
• No upfront Premium and broker fees until settlement.
• Provides the ability to roll up the strike prices to a higher value, if the market rallies to increase the minimum or maximum price level.
• The risk parameters are known, and fees are easily identified.

 Con’s:

• Basis is subject to change.
• Does not permit trading in and out of the markets as delivery is required.
• The upside potential price of the contract is limited to the maximum price.
• The Option contracts trade in 5,000 bushel increments.

   

Morning Grain Comments 3_10.pdf 

Morning Grain Comments 3_7.pdf 

Morning Grain Comments 3_6.pdf

Morning Grain Comments 3_5.pdf 

Morning Grain Comments 3_4.pdf 

Morning Grain Comments 3_3.pdf

Morning Grain Comments 2_28.pdf