Contracts - Explained

Forward Contracts:

Forward contracts allow you to lock in your cash price at any point prior to harvest, sometimes even years in advance, when the market reaches a level that you're happy with. This leaves you with no risk of a downfall in prices, however if prices do spike higher at a certain point in time that will be a missed opportunity. This type of contract is free with no cost to the producer and is by far the most popular type of grain contract used by many producers for its benefits.

Target Contracts:

Target contracts are an agreement between the farmer and the elevator that the farmer will sell a set number of bushels to the elevator if the market reaches a certain target price within the timeframe agreed upon. There is no fee for our target contracts. If the timeframe is exceeded without the market reaching the target price the contract is voided with no result. This type of contract has zero risk for the farmer. If the target price is reached the bushels are bought by the elevator and it becomes a Forward Contract for the price that was targeted.

Take some time to think about your goals, when you have a target price in mind fill out the document below and bring a signed copy to the office.

Target Contracts for website 2025.pdf

Minimum Price Contracts:

A Minimum Price contract means the elevator agrees that they will purchase the contracted bushels from the producer for the contracted price plus any additional increases seen in the market over a set period of time. Minus the fees charged for the ability to stay in the market and see any potential increase. There is no downside risk to the farmer but the fee is charged whether the market increases or not.

Price Later Contracts:

Price Later contracts mean that the elevator agrees to purchase a certain amount of grain from the farmer at a price to be determined at a later date. There is a fee charged for the privilege of pricing later. (This is not the same as a storage fee). The farmer is at risk of the market price dropping while paying this fee but could also benefit from an increase in market prices. In some cases it may be a better option than storage but you should work out the numbers with your grain buyer.

Basis Contracts:

A Basis contract is when the producer is only locks in the basis portion of the cash price for a set number of bushels. The cash price is then calculated with the previously set basis plus the current futures. There is a fee charged for these contracts. There is no protection from movement of the futures and no guarantee that the basis won't be higher at the time of sale. While this type of contract may have it's benefits to the seller in some instances, on a regular day the costs and risk associated may outweigh those.

Comparing Contract Types:

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