Not all marketing options are suitable for all producers. Please contact us to discuss which options fit within your understanding and marketing plan.
Deferred Payment Option
If you like the price but do not need the money we can defer payment to a later date. This is available with all contract options.
Priced Contract
A contract with a fixed price; also referred to as a flat price contract and is most common
Advantages:
Disadvantages:
Quantity and price is fixed, with no further price risk.
Stops storage immediately.
Money is immediately available.
No chance for further price increases.
Target Price Contract
An agreement, whereby a seller makes a firm offer to enter into a priced contract with SMC at a target price. We will then place an order to fill that offer as an open futures order accepting the offer as the market allows.
Advantages:
Disadvantages:
Price targets can be reached if you are not able to monitor the markets minute by minute.
May remove some of the emotion of pricing.
If you have a price goal in mind, this takes advantage of short-lived day rallies, if your offer is in the quote system.
The grain will be priced at an offer and if the market rallies past the set offer, additional gains will not be realized.
Offers must be made in 5,000 bushel increments.
Storage charges continue to accrue until the target price is reached and the order is filled.
It is possible to miss an opportunity to sell close to your target. An example is an offer to sell $4.00, and the price goes to $3.99; then the market falls to $3.50.
Forward Delivery Contract
This can be a Priced Contract or Basis Contract for delivery at a future date. 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 delivery on the contract. In the event of crop failure or inability to meet quality, Forward Contracts may be cancelled at the market, plus a cancellation fee or rolled forward to another futures contract month, at the spread between the futures months. Other considerations apply.
Advantages:
Disadvantages:
Downside basis risk is eliminated.
May take advantage of future rallies.
May avoid a weak basis or low flat price.
Future basis improvements cannot be realized.
You remain subject to the risk of changes in the futures prices until priced.
Once priced, no further price increase can be realized on bushles sold.
There is risk of fees associated with contract cancelation or contract roll.
Deferred Price Contract
This contract allows a producer to move grain from open storage to SMC ownership, stopping storage charges. A deferred price contract requires that a producer price the contract by First Notice Day of the current trading month.
Advantages:
Disadvantages:
May take advantage of near-by rallies.
May remove some of the emotion of pricing.
Storage stops the date the contract is entered.
Subject to basis and futures price risk.
Only available for pricing against current futures months.
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 Deferred Pricing Contract.
Hedge to Arrive (HTA or Futures Only) Contract
This is a futures only contract. At the time of contracting, the futures 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. In the event of crop failure or inability to meet quality, HTA contracts cannot be canceled, but can rolled forward to another futures contract month, at the spread between the futures months. Other fees and considerations apply.
Advantages:
Disadvantages:
Takes advantage of high futures prices.
Leaves opportunity for basis improvement.
Dowside futures risk is eliminated.
No margin calls
Subject to downside basis risk.
Cannot take advantage of futures rallies.
Delivery of grain is mandatory.
Must be contracted in 5,000 bushel increments.
Has associated fees.
Min-Max, OTC, Pricing Program Contracts
There is a plethora of other contracting tools available to producers using futures options, Over-the-Counter products, and proprietary pricing programs. These tools come with a distinct list of advantages and disadvantages that should be discussed in detail.
