What is grain contracts?
A grain futures contract is a legally binding agreement for the delivery of grain in the future at an agreed-upon price. The contracts are standardized by a futures exchange as to quantity, quality, time, and place of delivery. Only the price is variable.
What contango means?
Contango is a situation where the futures price of a commodity is higher than the spot price. In all futures market scenarios, the futures prices will usually converge toward the spot prices as the contracts approach expiration. Advanced traders can use arbitrage and other strategies to profit from contango.
What is an HTA grain contract?
The Tate & Lyle Hedge to Arrive (HTA) grain contract allows the producer to lock in futures when it is advantageous and leave basis open until a later date. The producer can establish a basis level anytime ahead of delivery; however basis must be set before delivery is made.
What happens if you don’t complete grain contract?
Poverty mentality about grain values is and has been very costly, over the last 6 years. Now if you can’t fill your contract and don’t have the cash to buy out of it, you will be transfering equity to the buyer in the form of borrowed money or other assets.
What are the terms and conditions of a grain contract?
terms and conditions, the buyer may not be required to abide by it. “Each contract, including these Terms and Conditions, is the entire agreement between the Buyer and the Seller for the delivery of grain specified in the Contract, and replaces all prior discussions, representations, agreements and understandings.”
When does a producer decide to apply grain to a price later contract?
The price on the HTA contract must be established during regular trading hours of the Chicago Mercantile Exchange. A Price Later (DP) contract allows the producer to deliver the grain without establishing a price. When would a producer decide to apply grain to a Price Later (DP) Contract?
What’s the interest rate on a grain contract?
Another contract Mayer reviewed allowed for $0.05/Mt/day plus interest, after the end of the extended delivery period. One sample contract Mayer cited required the grain company to pay the farmer a one-time lump sum payment of $10 if the grain was not called in before the end of the extended delivery period.
Is there a substitute for a grain contract?
It is not a substitute for specific terms and conditions contained in contracts, but general guidelines, put together by grower, trade and marketing representatives, as an aid to understanding grain contracts. There is now a range of marketing tools designed to meet producers’ commercial needs.