Cash grain contracts are entered between the seller (producer) and buyer (end user) for a specified quantity of grain at an agreed upon price, timeframe and delivery location. All cash grain contracts have two main price components: Futures price and Basis. Futures price is discovered through commodity exchanges, while Basis is the difference the local cash market is willing to pay the producer.
A cash sale is a contract to sell a specific quantity of grain at a fixed price for a specified delivery time period. The price is determined by taking the Chicago Board of Trade futures and adding/subtracting basis. There are two main types of cash sales: spot sale and forward contract. A Spot sale is a cash sale to a delivery location using the price (futures+basis) that is currently being offered the day the grain is delivered. A forward cash contract is used to set the price for the grain at a future delivery date. The price, quantity, and delivery period are defined in the sale contract.
Hedge to Arrive Contract (HTA)
A Hedge to Arrive Contract is similar to the forward cash contract except basis remains open to price fluctuation. An HTA contract sets the futures price (based off Chicago Board of trade), quantity, and delivery period. The basis is left to be established at a later date (anytime before delivery). These are commonly used when the futures prices are at attractive levels but the local basis is seasonally weak. There are usually additional fees charged by the delivery location for this type of contract.
A basis contract is the opposite of a HTA. In a basis contact the basis, quantity, and delivery date are all set. The futures price is left open to be established at a later date. Basis contracts are often used when local basis levels are historically strong but the producer is hopeful for a rally in futures price.
Maximum Quantity Allowed
In the AgYield simulator, each game has a maximum amount of grain that a player can sell through cash grain contracts. This limit is set by the game’s Administrator as a % of APH for each crop.