GRAIN MARKETING

    PRO COOPERATIVE

    Popular Contracts Explained

    To learn more about any of these offerings or other grain marketing strategies, please reach out to a Pro Cooperative grain originator. Pro’s goal is to educate producers on different risk management strategies, along with providing market insight and recommendations.

    Basis

    This contract locks in basis for a given delivery period. The producer must set futures or roll by the identified delivery period. This gives the producer a window of time to take advantage of a market rally while locking in desirable basis levels.

    PROS

    • Remove basis risk
    • Participate in market rallies

    CONS

    • Unable to take advantage of basis appreciation
    • Susceptible to falling futures market

    HTA (Hedge To Arrive)

    An HTA (Hedge to Arrive) contract allows the producer to lock in futures. Basis must be established prior to delivery, which takes place prior to the first notice day of the chosen futures month.

    PROS

    • Removes downside futures risk
    • Locks in carry

    CONS

    • Unable to participate in market rallies
    • Susceptible to basis depreciation

    Extended Price

    An Extended Price contract allows the producer to sell cash grain at spot prices while maintaining upside (and downside) participation in the market. At the time the sale is made, a futures contract is bought in a chosen month. Upon liquidation, any gain or loss is applied to the cash contract.

    PROS

    • Immediate cash payment
    • Participate in market rallies

    CONS

    • Downside risk in failing market
    • Potential for margin calls

    Minimum Price

    A Minimum Price contract establishes a floor while retaining upside potential. The producer receives a cash price based on spot values, less the premium for the futures option. There is no downside risk, and the value added by the option (if any) at liquidation is applied to the contract.

    PROS

    • Immediate cash payment
    • Identified risk

    CONS

    • Requires upfront investment to purchase option
    • Value of option doesn’t move penny for penny with market

    Bonus Premium

    A Bonus Premium contract gives the producer a premium over current market values in exchange for a commitment for a like number of bushels. At the time of sale, a futures option is sold and that premium is applied to the contract. In exchange, the producer puts in an offer at the strike price of the option that cannot be cancelled until it expires.

    PROS

    • Premium over current market

    CONS

    • Risk of contracting an equal amount of bushels

    Accumulator

    Accumulator contracts offer a premium price in exchange for accepting quantity uncertainty. If prices rise, accumulators can price additional quantities. If prices fall, the contracts can stop pricing early. Pro offers several different accumulator pricing styles to customize to any grain marketing plan.

    CASH BIDS

    TEAM

    GRAIN RESOURCES