Purchase Contract (Future Delivery)


A forward delivery contract allows the producer to lock in a price for future delivery of grain.  This is used normally to lock in a price on new crop grains as well as farm stored grains.  Payment will be made upon delivery of the grain or the payment can be deferred.

Advantages:

  • The producer can lock in a price and quantity before the grain is delivered.
  • Downside price risk is eliminated.

Disadvantages:

  • This is a firm delivery contract in which the producer will have to make delivery.
  • The producer has eliminated any upside market profit potential unless you use a minimum price contract.