Courses 1Lesson 1

You Can Do Either of Two Things

•

You can enter into a forward contract with a grain firm.

This contract is made between you and a grain processor or elevator. (These firms are

known as ‘commercials’.)

They will quote you a price for your crop to be delivered to them at some point in the

future, usually shortly after harvest.  Often, their price is not as high as the market’s

current trading level.  Or,

•

As an alternative, you could sell your crop on the futures market.

The futures markets are organized exchanges or marketplaces where many individuals

congregate for the purpose of buying and selling contracts in given markets for future

delivery and/or for speculation.

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© 2000 MBH Commodity Advisors, Inc.

Prices there will be relatively free of manipulation by large commercial interests, which

may have almost complete control over what you will be paid in your hometown area for

your crop.  Provided your corn meets the proper exchange specifications, you can sell it

in advance on the futures exchange.

You will not get your money until the crop is delivered to the buyer, but the price you get

will be locked in.  Regardless of where the price goes thereafter you will be guaranteed

the price at which you sold your crop.