Grain Selling Tools and When to Use Them

Cash Sales ( grain delivered) ...Use when:

• Price in upper 1/3 of price range
• Basis narrow or normal
• Expected price drop seasonal or cycle

Cash Forward Contract ...Use when:

• Price in upper 1/3 of price range
• Narrow or normal basis
• Price above cost of production

Futures (sell position…short) ...Use when:

• Price in upper price range before crop is ready to sell
• Basis wide (means cash is weaker)
• Price movement is unknown or expected to go lower

Future Fixed or Hedge-to-Arrive ...Use when:

• Price is high
• Basis wide
• Price above cost of production

Option (puts) ...Use when:

• Price is high
• Basis wide or unknown
• Unknown risk with price or yield

Delayed pricing contract (grain delivered) ...Use when:

• Price low
• Basis movement unknown
• Expected price to move seasonably or cycle higher

Basis Contract ...Use when:

• Price low
• Basis narrow or plus
• Expect seasonal or cycle highs coming

Storage ...Use when:

• Price low
• Basis wide
• Expected price move higher seasonally or cycle
• Storage available

Government Loan ...Use when:

• Price low
• Basis wide
• Discounts in the market
• Storage available

Futures (buy position…long) ...Use when:

• Price low
• Basis wide
• Basis expected to narrow
• Trend up seasonally & cycle

Option (calls) ...Use when:

• Price low
• Basis narrow
• Trend up seasonally or cycle

Min. Price Contract
(grain delivered) ...Use when:

• Price low
• Basis narrow
• Trend up

Source: Mike Lockhart, NCTC Farm Business Management