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Topflight Grain Marketing Programs & Grain Contracts

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

Marketing Programs

Topfight Grain offers several marketing programs, designed to compliment your own marketing plan. These programs create diversification in marketing, spreading risk between several strategies. If one, or all, of these programs interest you, we suggest that you commit a portion of your production to the program, and that you market some grain through your own personal plan.

To protect the investment in your crop and its marketing, Topflight Grain also offers crop insurance, assistance and coverage.

TOPFLIGHT GRAIN MARKETING POOL

Each year Topflight Grain offers to their patrons a Marketing Pool in which producers can commit a specified number of bushels for the Topflight staff to market. Close to 800,000 bushels were marketed through the 2007 Marketing Pool. The average price across the scale this fall was $3.42 on corn and $7.82 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 typically 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 98,000 bushels were enrolled in the harvest 2007 average price program, with a contract price of $3.63, 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, or Matt Dean in the Monticello office, at 1-888-762-2163, for more information, or contact your local Topflight office.

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 Matt Dean. 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 Matt. 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.

Topflight Grain Contracts

Cash Forward

Minimum / Maximum Contract

• The goal of the Minimum / Maximum Contract is to lock in a cash floor price while providing for limited upside market potential. 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).
• 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 sets a futures price, determining the basis level at a later date;
• It is used when futures price meets objectives, but basis appreciation is expected;
• A futures price and option month are established, the producer will establish the contract basis at a later date;
• Futures may be rolled into another futures delivery within the current marketing year.

Put Cash Contract

• The goal of the Put Cash Contract is to lock in a futures floor price with no basis established, while providing 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), less the service fee. If prices rise above the futures price, a higher contract price can be captured.
• The risk to the producer, once the contract price has been established, is basis changes.

Price Later (Delayed Pricing/DP) Contracts

• Price later contracts are issued once grain has been delivered.  The contract allows the producer to establish a final pricing at a later date.
• Payment is made in full when grain is priced.
• Upon delivery, title of the grain passes to the buyer. Price later (DP) is not storage or warehouse receipt.
• A price later contract will be issued after delivery is complete. It must be signed and returned immediately to meet the requirements of the Illinois Department of Agriculture.

Minimum Price Contract

• This tool is an options-based contract which establishes a minimum price guarantee but allows upward price enhancement.
• This tool is used when the market provides 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. If the contract price is later adjusted due to higher futures price 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 prior to the first notice day for the established futures month and during Chicago Board of Trade hours.

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. Any week that the market falls below the floor price, half the weekly bushels will be priced; any week that the market price is above the contract price, 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 5 cents for corn contracts and 7 cents for bean contracts. 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.