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Welcome to Provision Feed
Quality Feed for Healthy Livestock
Grain Marketing
Cash Sale
A cash sale contract allows the the producer to sell grain at the current basis and futures level.
PROS
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Eliminated futures and basis risk
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Immediate cash payment
CONS
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Can no longer take advantage of basis improvement or futures rallies.
HTA (Hedge To Arrive)
An HTA (Hedge to Arrive) contract allows the producer to lock in futures. Basis must be established prior to delivery, which takes place prior to the first notice day of the chosen futures month.
PROS
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Removes downside futures risk
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Locks in carry
CONS
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Unable to participate in market rallies
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Susceptible to basis depreciation
Minimum Price
A Minimum Price contract establishes a floor while retaining upside potential. The producer receives a cash price based on spot values, less the premium for the futures option. There is no downside risk, and the value added by the option (if any) at liquidation is applied to the contract.
PROS
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Immediate cash payment
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Identified risk
CONS
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Requires upfront investment to purchase option
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Value of option doesn’t move penny for penny with market
Basis
This contract locks in basis for a given delivery period. The producer must set futures or roll by the identified delivery period. This gives the producer a window of time to take advantage of a market rally while locking in desirable basis levels.
PROS
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Remove basis risk
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Participate in market rallies
CONS
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Unable to take advantage of basis appreciation
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Susceptible to falling futures market
Forward Contract
This contract locks in a cash price for future delivery.
PROS
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Eliminates futures and basis risk
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Producer can take advantage of any carry in the market
CONS
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Can no longer take advantage of basis improvement or futures rallies
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Payment will not be made until delivery
Deferred Payment
This contract defers the producers payments until a specified date.
PROS
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Choose when to recognize income from the contract
CONS
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Can no longer take advantage of basis improvement or futures rallies