Futures Fixed Contract
Execution:
- Contact your local FFGE elevator to establish a delivery date, bushel amount, futures level, and pricing time frame
- Deliver grain as agreed
- Establish basis level by pricing date
- Receive payment
Strategy:
This contract should be used when the futures price is relatively high and the basis is low. The futures and basis may often move in opposite directions.
Advantages:
- Eliminates downside futures risk
- Avoids service charges
- Can eliminate storage costs and risks
- Allows pricing flexibility in the basis
Disadvantages:
- May have minimum bushel requirement
- Title of grain is transferred
- Payment is not received until the basis level is established
- Delivery is required
- Open to basis risk
- Requires historical futures and basis knowledge
Fees:
- $.05/bu for current and following crop year
- $.08/bu for beyond following crop year