TOPFLIGHT GRAIN MARKETING POOL

Each year Topflight Grain offers to their patrons a Marketing Pool where they can commit a certain percentage of grain production for the Topflight staff to market. Close to 2 million bushels were marketed through the 2004 Marketing Pool. The average price across the scale this fall was $2.45 on corn and $6.40 on soybeans, plus LDP gains, and possible gains from subsequent strategies. Some of the features of the marketing pool concept:

1. The Topflight staff makes all marketing decisions.
2. The only charge is the service fees on options we purchase and this cost is part of the contract price.
3. Conservative risk management strategies will be used to accomplish pricing of the grain.
4. Participants will be provided an update on the pricing progress of the pool bushels as the year unfolds.

Sign-up for each program year concludes on December 15, prior to the new crop year. Please call Denny Hill at the Maroa office for more information about the marketing pool, at 1-800-955-2180, or contact your local Topflight office.

AVERAGE PRICE CONTRACT

The average price program markets corn during the historical contract highs. These contract highs, historically, occur during the winter and spring months, prior to harvest. Taking advantage of this opportunity, the average price contract sells equal portions of grain each week, during the months of January through May. Payment for the Average Price Contract can be made after delivery, during harvest, or deferred to January. At the end of the pricing period, the producer may choose to purchase a call option, as up-side price protection on the contract.

Almost 375,000 bushels were enrolled in the harvest 2005 average price program, with a contract price of $2.15, for the fall delivery, fall pay contracts.

Sign-up for the average price contract concludes on December 15, prior to the new crop year. Please call Derrick Bruhn at the Monticello office, at 1-888-762-2163, for more information, or contact your local Topflight office.

NORTHSTAR MARKET PROGRAM

The Northstar Marketing program is managed by Northstar Commodity, through Topflight Grain. This marketing program combines three different market approaches: 1) daily average, 2) Relative Strength Index, and 3) market advisor, Al Kluiss.

The program has several benefits, including improvement of pricing opportunity, improvement in price-risk management, diversified marketing plan, 24 hour access to your account, and documented pricing performance to share with lenders.

Entry into the Northstar Program is open; producers may enroll at anytime throughout the year. If you're interested in this plan, please call Derrick or Jason in the Monticello office at 888-762-2163, for more information.

CROP INSURANCE

The protection of crop insurance is required by many lenders and the FSA, as well as being a risk management tool chosen by many producers. As with most insurances, crop insurance provides various levels of protection at various costs.

Crop insurance information and coverage is available in Topflight's office in Monticello, through Derrick Bruhn and Jason. They have studied the programs available, and have information to assist producers with decisions, based on levels of coverage and the cost for that coverage. All producers are welcome to discuss crop insurance needs with Derrick or Jason. Coverage may be purchased from them, or through another crop insurance agent. Either way, they will be happy to assist you.

If you would like assistance through the Internet, the University of Illinois farmdoc website has a very informative section at www.farmdoc.uiuc.edu/cropins.

****Commodity trading is risky and Topflight Grain Cooperative assumes no liability for the use of any information contained herein. Past financial results are not necessarily indicative of future performance. Neither the information, nor any opinion expressed, constitutes a solicitation to buy or sell futures or options on futures contracts, or OTC products. All rights reserved.

Marketing Programs &
Grain Contracts

Is your marketing plan a little old fashioned? Some of our contracts and programs may provide the update you need.

• The goal of the Minimum / Maximum Contract is to lock in a cash floor price while providing for upside market potential. There is a limited upside potential (maximum price) with this contract. The minimum price is increased by selling the maximum price. There are no storage charges and the minimum price is advanced at the time of delivery.
• The price of the contract is the cash price for the specified delivery period less the cost of locking in the upside potential (cost of call purchase less the call sale) plus the difference between the call purchased and the call sold.
• The producer risk will be limited on the downside to the minimum price. On the upside, the producer has limited potential gain.

Hedge-to-Arrive Contract - HTA

• This tool lets you lock in a futures price but not a basis level;
• It is used when futures price meets your objectives but you expect further basis appreciation;
• A futures price and option month are established, then buyer has the option to establish the contract basis to be used for final pricing.
• We will give the producer the opportunity to roll from one futures month to another. Rolls will only be allowed during current marketing year.

Service Fee

2 cents per bushel will be charged to write an HTA

Rolling

2 cents per bushel plus or minus spread difference
1 roll will be allowed

Market Loss

Pay, when rolled

Production

1 year

Delivery

Required on all contracts

Act of God

3 cents fee plus market difference

Put Cash Contract

• The goal of the Put Cash Contract is to lock in a futures floor price with no basis established, while providing for upside market price potential.
• The Contract Price is the future price chosen (strike price) less the cost of locking in the floor cost of the put. A service charge is assessed, which reduces the minimum price. If prices rise above the futures price, a higher price can be captured. The cost of lock in the floor will be deducted from the higher price.
• The risk to the producer is known at the time of making the contract and is limited to the cost of locking in the floor (cost of put) plus any service fees.

Service Fee

2-1/2 cents for purchase of the option
1-cent for liquidation

Rolling

1-1/2cent for option roll (only in current market year)

Market Loss

Pay, when rolled

Production

1 year

Delivery

Required

Act of God

5 cents fee plus market difference at buyers discretion

Price Later Contracts

• This tool is used where the seller delivers the grain and has until some later date to establish a price.
• This is used when the buyer physically needs to move the grain but doesn’t necessarily have an established price.
• Payment is made in full when grain is priced.
• Upon delivery, title of the grain passes to the buyer. This is not to be confused with storage or warehouse receipt.
• A price contract will be issued after delivery is complete. It must be signed and returned immediately to satisfy the Department of Agriculture.

Service Fee

Will be assessed for the price later as market conditions warrant.
13 cents Soybeans min per bushel
13 cents Corn min per bushel

Minimum Price Contract

• This tool is an options-based contract which establishes a minimum price guarantee but the producer can still benefit from any price rallies.
• This tool is used when the market provides you with a net flat price which meets the producer’s objectives, but the producer still feels prices have a good chance of improving.
• Guaranteed minimum price is established at the time contract is written based on the option used and the period for which grain was sold.
• Payment is made at the time of delivery on the guaranteed price. If the contract is later priced and a premium is due the seller, a second payment will be issued.
• Contract must be priced during marketing hours.

Basis

• This contract is a form of a futures contract where the basis is established but a futures price has not been locked in.
• It is issued when the producer feels basis levels are strong but that futures prices could improve. It is also used when a producer expects higher prices for grain but needs to generate cash flow and is willing to give up some basis appreciation.
• When a contract is written, a basis level with the futures month is established. The buyer has the option to establish the futures price to be used for final pricing at a later date. This must be done the first notice day for the established futures month. Contract must be priced during Board of Trade hours.
• Topflight Grain will accept all corn varieties at Atwood, Pierson, LaPlace , Bement, Milmine, Cisco, Monticello and Seymour . RoundUp Ready corn will also be accepted at Maroa, Emery & Waller. These three locations will not be able to accept hybrid corn with stacked traits – more GMO traits than RoundUp Ready. The acceptance of the traits will be continuously monitored, and changes will be made when the market accepts these traits. If you have a “stacked” trait hybrid in this area, please contact your grain originator so that we can make arrangements to channel it into an appropriate market.

Accumulator Contract

This type of contract allows producers to have bushels priced weekly above the current market, if certain conditions are met. Contents of the contract include an accumulator futures sale price, a knock out barrier, and a specific pricing period. The accumulator futures sale price will be above the current market, the knock out barrier will be below the current market, and the pricing period will be a specific amount of weeks. Pricing will occur in equal amounts once a week at the accumulator futures sale price, unless the current market is at or below the knock out barrier. If the current market falls below the knock out barrier anytime during the pricing period, the contract has finished pricing. If the current market is above the accumulator futures sale price anytime during the pricing period, the amount of bushels being priced for that week will double. The parameters for these contracts change as the market fluctuates. The fee for these type of contracts is 3 for a futures only and 2 cents for a cash contract. Please contact your local Topflight office for more information.

Discount Contract

• This contract allows the producer to sell grain to Topflight Grain corn using a pre-selected futures month target futures price and a pricing date. In return for this commitment to sell, the producer receives a discount that can be used towards his fertilizer bill, or any other expense.
• If on the specified date, the futures month contract closes above the target futures price, the producer will receive the target futures price for the contracted grain quantity, minus the fall delivery basis.
• If on the specified date, the futures month contract closes below the target futures price, the producer must price the contracted grain quantity using Topflight's local cash bid.
• A producer can commit to deliver their choice of bushels (in 5,000 bushel increments), up to 25% of annual production or a maximum of 25,000 bushels to this program.
• Each 5,000 bushel commitment entitles the producer to a cash refund.

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