Rooney Grain Contract Options
At Rooney Grain, we want to provide our producers with the marketing alternatives necessary to best suit their needs and help maximize their earning potential. Below is a list of contract options we offer and a brief description for each one.
Rooney Grain is a state licensed grain warehouse keeper and grain dealer. This means that we are audited by the state annually to insure we are meeting and following all applicable standards, regulations, and specifications.
Storage is one of the more well-known contract options. It allows the producer to deliver their grain to the elevator for storage, while maintaining the ownership. The producer is free to remove grain, or sell grain, as they please throughout the contract period.
- Producer maintains ownership in grain
- Freedom to price when the producer wants
- Guaranteed standard quality of grain
- Stored grain valid as loan collateral for the producer
- Producer is subject to market volatility until priced
- Producer’s storage fees must be paid up front for USDA loan
Cash Sale Contract
A cash sale contract is a very common contract. The producer sells a specific quantity of grain for a specific price and delivery period.
- Payment guaranteed within 7 days of contract
- Price is set with no further risk exposure to the producer
- No capitalization on seasonal pricing rallies
- Delivery window is set
A forward contract locks the producer’s price in for a set quantity of grain, delivered by predetermined date in the future. This is only subject to change by agreement from both parties
- Ability to set a profitable price for the producer’s commodity
- Delay the delivery to a better time for the producer
- Producer is relieved of downward price risk
- Producer loses potential price upside capitalization
- Grain stored on farm opens the producer to grain quality reduction risk
A basis contract allows the producer to lock in the basis for a set quantity of grain for a set delivery period. This mitigates some of the producer’s risk however leaves the futures price for the delivery month open to be established as the producer pleases. When the producer decides to set the futures price, the cash price is determined using the contracted basis.
- The producer has the opportunity to capitalize on futures price rallies with no basis risk
- Grain may be delivered prior to futures pricing for 60% payment in advance
- Producer may roll the futures pricing month by adding the price spread to the basis
- Producer is unprotected to a decrease in futures price until they set it
- Any payment advance may need to be returned if futures price falls low enough
Hedge to Arrive Contract
Hedge to arrive allows the producer to set the price of delivery, quantity of bushels to deliver, and the time period for delivery, while leaving the basis to be determined at a future date. This is the exact opposite contract as the basis contract.
- Allows the producer to capitalize on profitable futures pricing as well as potential seasonal basis improvements
- With the futures price set, the producer is unable to capitalize on any futures improvement for contracted bushels
Delayed Payment Contract
This contract is similar to that of a cash contract where it sets price, delivery period, and quantity of bushels to deliver. The difference is that the producer decides they wish to “delay” or “defer” payment until a later date. This would push payment beyond the standard 7 dates to a date of the producers choosing. It also transfers ownership of the grain to the elevator upon delivery.
- Producer capitalizes on profitable pricing while delaying payment to a more opportune time frame
- Eliminates price fluctuation risk for the producer
- Grain becomes elevators property and thus not valid loan collateral
- Producer becomes a creditor to the elevator until payment date
Average Price Contract
This commits a portion of contracted number of bushels to be sold every trading day over a set contract period.
- This allows bushels to be automatically priced daily
- This helps the keep the producer’s emotions out of their marketing decisions
- It is possible for the average price to end up lower then when the contract is originally written if futures prices fall
- The contracted bushels are committed to the price averaging through the extent of the contract and not available for other marketing strategies
All contracts are subject to fees not listed within their descriptions. Like everything, there are many ways to successfully market your grain. The contracts we offer we feel can bring value to the producer if used correctly. There are pros and cons to each tool with no “one size fits all” solution. We are happy to discuss any of the options we offer with you to try and help determine what best fits your operation.
*Commodity trading is risky and Rooney Grain, LLC assumes no liability for the use of any information contained herein. Past performance is not necessarily representative of future performance*