Contracts

Definitions & Contracts Available to Patrons

• Basis

  • The difference between a Chicago Board of Trade futures price and a cash price. (Not profit)

• Contract

  • A genuine mutual agreement between two or more competent parties to do or not to do something that is lawful for a sufficient consideration; it is an agreement which, when violated, will support the award of damage to the injured party.

• Spot Contract

  • Price at the close of market day used in pricing grain delivered with no contract.

• Forward Contract

  • A contract for a specific time shipment and price in the future.

• Basis Contract

  • A contract for which the basis has been fixed, or predetermined, in the contract. Normally a delivery date is also established at this time.

• NBE Contract

  • A contract for which the futures has been fixed for a established time of delivery of grain and the basis to be set any time before delivery.

• Deferred Payment

  • A contract to pay a specified price at a specified time for grain that has already been delivered and priced. (Is used by the farmer to defer income.)

• Price Later

  • Grain delivered with a price to be established by a set time. (Sometimes for a set charge.)

• Warehouse Receipt

  • Negotiable document, issued in Certificate form by the warehouseman in receipt for grain received and can be used as collateral or security.

• Open Storage

  • Grain stored under informal agreement with a storage facility or local grain elevator.

• Minimum Price Contract

  • The minimum price contract is an option based contract that establishes a minimum price guarantee but allows upward price enhancement should that occur. Like a forward contract, it can be used before planting, during the growing season, at harvest or after harvest.

• Offer

  • A binding contract between the buyer and seller for a specified amount of grain if a set price is reached for a specific shipment period, by a set date, unless
    cancelled.

• KO Accumulator With Parachute

  • Allows the Producer to price above the current market with an assurance that the entire base quantity is price.

• No KO Accumulator With Floor

  • Allows the Producer to price above the current market with a Minimum Floor Price established and assurance the full base quantity is priced.

• KO Accumulator

  • Allows the Producer to price above the current market in exchange for Knock Out and Potential Double Up Risk.

• No KO Accumulator With Non Pricing Level

  • Allows the Producer to price above the current market in exchange for potential Double Up Risk and non price bushels.

• KO Accumulator With Reset

  • Allows the Producer to price above the current market without Double Up Risk in exchange for Knock Out Risk.

• NO KO Accumulator With Reset

  • Allows the Producer to price above the current market without Double Up Risk or Knock Out Risk.

• Accumulating Average

  • Allows the Producer to place a floor under the market but allow for upside price potential to still exist.