Farmers Cooperative Elevator Company offers the following marketing tools
Please feel free to stop in or call us to discuss any of these marketing contracts.

            Cash Contract                        
Forward Cash Contract
Delayed Price Contract
Offer to Sell Contract
Futures Fixed Contract
Basis Fixed Contract
Extended Price Contract
Minimum Price Contract
Deferred Payment Contract
Floored Average Contract
Accumulator Contract
Grain Bank

 Cash Sale

Execution:

1. Deliver grain to your local FCE elevator
2. Sell grain at the current bid
3. Receive payment

Strategy:
Use this tool when the cash price has met your objective. The futures and the basis levels may both be at favorable levels or one may be significantly stronger than normal to compensate for the weaker factor.

Advantages:

       Easy to execute

       Receive payment immediately

       Eliminates all risk of price decrease

       No storage costs or risk

Disadvantages:

       Futures and basis are both locked in

       Inability to participate in a market rally

       Delivery is required

Forward Cash Contract

Execution:

1. Contact FCE local elevator to lock in cash price for some time frame in the future
2. Deliver grain as agreed
3. Receive payment

Strategy:
This contract can be used for two different marketing strategies:

1. Use the forward contract to lock in a favorable new crop price before your crop is planted or harvested.
2. The forward contract can also be used to "lock in a carry." The market may pay more for grain delivered at a later date. If the forward price is greater than the current price plus your storage and interest costs, it would be beneficial to lock in the higher price.

Advantages:

       Easy to execute

       Eliminates all risk of price decrease

       Ability to lock in the carry

Disadvantages:

       Payment is not received until delivery

       Futures and basis are both locked in

       Inability to participate in a market rally

       Delivery is required

       Potential penalty for cancellation

Delayed Price Contract

Execution:

1. Deliver grain to your local FCE elevator
2. Establish service charge & pricing time frame for contract
3. Price at some date in the future
4. Receive payment at time of pricing

Strategy:
This contract does not lock in any component of the price structure. This contract should only be used when the cash price is expected to appreciate enough to cover all service charges and interest expense.

Advantages:

       Allows pricing flexibility in the futures and basis

       Delivery and pricing do not coincide

       Eliminates storage risk

       Ability to take advantage of carry markets

Disadvantages:

       Title of grain is transferred upon contracting

       Payment is not received until price is established

       Delivery is required

       Interest and service charges accrue

       Market must appreciate or develop a carry (prices higher for later time frame)

       Open to futures and basis risk

Futures Fixed Contract

Execution:

1. Contact your local FCE elevator to establish a delivery date, bushel amount, futures level, and pricing time frame
2. Deliver grain as agreed
3. Establish basis level by pricing date
4. 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

Basis Fixed Contract

Execution:

1. Contact your local FCE elevator to establish a delivery date, bushel amount, basis level, and pricing time frame
2. Deliver grain as agreed
3. Establish futures price by pricing date
4. Receive payment

Strategy:
This contract should be used to lock in a favorable basis level and allow time for the futures market to appreciate. Generally, when the futures are low, the basis will be high.

Advantages:

       Eliminates downside basis risk

       Avoids service charges

       Can eliminate storage costs and risks

       Allows pricing flexibility in the futures

Disadvantages:

       Title of grain is transferred

       Full payment is not received until the futures level is established

       Delivery is required

       Open to futures price risk

       Requires historical futures and basis knowledge

Extended Price Contract

Risk-Moderate to High. The producer can lose 20% of the cash price or more.

Reward-High, as any gain in futures is directly returned to the producer.

Use when:

1. Basis is as good as expected.
2. Market shows upside potential.
3. Producer can accept risk or loss.
4. Futures are low 

Calculations:                                                                      

                                                                                 Example
Futures Month     ­­_____________                 July
Futures Price         _____________                 $2.45
Cash Grain Price___________                         $2.10 (-$.35 Basis)
20% Withholding_____________                  $.42
Contract Charge_____________                    $.02
Sell Stop @ _____________                            $2.03 (Must be placed)
Cash Bushels_____________                           4561
Bushels this contract_____________              5000
Cost this contract_____________                  $2,200.00
Extended Cash Price_____________               $1.61
                                                                                Cash Price X Cash Bushels
                                                                                Less Cost of this contract
                                                                                                ¸ Cash Bushels 

The Contract Charge and withholding will be deducted from the producers grain check at the time of writing. Producers cannot use an “Extended Price Contract” on a prior grain sale. Producers will not be allowed to roll the contract to a deferred month.

Floored Average Contract™

Risk-Low to Moderate, as the producer has a futures floor, with upside potential. 

Reward-Moderate, as the producer can gain upside average, but not total rise.   

Use when:

1. Basis is good.
2. Futures prices are stagnant.
3. Cost is cheaper than put options.
4. Pricing window is appropriate. 

Advantages:

       Producer sets pricing period and delivery time.

       Producer gets the better of the average price or the minimum price.

       Sets a minimum price for the contract

       No additional service charges beyond up front charges 

       Set cash price any time up until time grain is delivered

Disadvantages:

       Subject to market fluctuations

       Producer will not get highest price

       Service charge on contract for setting minimum

       Cost may be prohibitive 

       Producer is subject to basis at elevator