Cash Contracts are also known as Priced Contracts. These contracts allow the grower to lock in a specific price for predetermined delivery—immediate or on a deferred date.
The grower agrees to deliver a specific quantity and quantity of grain for a determined delivery period at the cash price based on CHS Drayton’s board price on the day the grain is sold.
Hedge-to-Arrive (or HTA) Contracts allow the grower to lock in the current futures board price of the grain while leaving the basis and cash price to be set at a deferred date.
The grower agrees to deliver a specific quantity and quality of grain for a determined delivery period. The grower sets the futures price, leaving the basis open and the cash price undetermined until the basis price is set. The basis price must be set before a specific date on the HTA contract with CHS Drayton in order to avoid having the basis automatically set by that date.
Note: There is a $0.05/bu. fee associated with HTA Contracts that are established five months ahead of the delivery period. This fee will then increase an additional $0.05/bu. per five-month time frame.
A Basis Contract allows the grower to lock in their basis now but lock in a futures price at a deferred date.
The grower agrees to deliver a specific quantity and quality of grain for a determined delivery period. The basis is locked in on the contract at this time. The final price of the contract is determined at a future date, as indicated on the grower’s contract with CHS Drayton, by locking in the futures price and adding/subtracting the basis value on the grower’s contract.
Delayed Price Contracts
Delayed Price (or DP) Contracts allow the grower to deliver their grain today and price their grain at a future date established by CHS Drayton.
The grower hauls their grain to CHS Drayton but the cash price at the given time is lower than they want. The DP Contract allows the grower to move grain and wait to lock in a price until the contract reaches its expiration date or prices become more attractive and the grower decides to sell.
Note: Delayed Price Contract charges vary per commodity during select times of the year. Delayed Price Contracts at CHS Drayton may also be cut off at any given time. Please call for current DP Contracts.
Compass Cash Plus Contracts
Cash Plus Contracts allow the grower to get a premium on today’s sale for an offer to sell grain in the future at a price they are happy with. Cash Plus Contracts can be used anytime during the marketing year and is for producers that would be glad to collect a premium on a nearby sale and keep a percentage of their unsold crop until the firm offer date.
Example Quote: [17 cents CZ6 430 to 10/26/16]
In this example, the grower would collect a 17 cent premium for corn contracted today but would be obligated to sell the same bushel amount in December if December corn futures are at or above $4.30 on 10/26/16. If December corn futures are below $4.30 on 10/26/16 then the producer is not obligated to sell.
Compass Daily Price Plus Contract
The Daily Price Plus Contract is a marketing tool that prices an equal amount of bushels daily at a “Plus Price” which is a price above the current market on day one. If your futures reference month trades at or below the “Trigger Price” at any time the remaining quantity will be priced at a guaranteed “Floor Price.” If the reference futures price is at or above the “Target Price” at the expiration date, your bushel obligation doubles at the “Target Price.”
Example: [Plus/Target level is $4.80, Floor Level is $4.40 and Trigger is $4.00]
The current market is $4.30. The trading period is 01/21/15-10/22/15. In this example the grower prices an equal amount of bushels at $4.80 as long as December Corn Futures do not hit the trigger price of $4.00. If the trigger price is hit then the remaining bushels are priced out at the Floor price of $4.40. If the trigger price is never hit and the Futures price is at or above the Target level of $4.80 at the expiration date then the amount of bushels contracted doubles. If the trigger price is never hit and the Futures price is below the Target level at the time of expiration then the grower has a contract for the original contracted amount at $4.80.
Compass Price Builder Bonus Contract
The Price Builder Bonus Contract is a marketing tool that prices an equal amount of bushels daily at a price above the current market. Unlike the Daily Price Plus Contract, there is no security of a floor. If the futures hit the knockout price the contract ends and the grower has a contract for the amount of bushels priced up until the knockout price was hit. If the knockout price is never hit and the futures market is at or above the target price on expiration your bushel obligation doubles.
Example: [Plus/Target level is $4.90, Knockout level is $4.00 and the current market is $4.30]
The trading period is 01/21/15-10/22/15. In this example, the grower will price an equal amount of bushels at $4.90 as long as December Corn futures stay above the knockout level of $4.00. If the knockout level is hit then the grower will have a contract only for the bushels priced up to that point. If the knockout level is never hit and December corn futures are at or above $4.90 on 10/22/15 then the contracted amount is doubled at $4.90. If the trigger price is never hit and the futures price is below the target level at expiration then the grower has a contract for the original contracted amount at $4.90.