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BIG RIVER UNITED ENERGY CONTRACT INFORMATION
PRICE LATER CONTRACTS:
14c minimum first 90 days
3c/month thereafter
To be priced by 9/30/16
Contract to be priced at current spot values
75K bushel cap per customer
Book bushels amounts in advance with signed contracts prior to deliver

 

HTA CONTRACTS 
HTA please call fees 563 875 5530
The fee will be deducted from the futures price and you will receive a net futures price on your HTA contract.
A minimum of 5000 bushels and in increments of 5000 bu is required for this contract.
This contract can not be rolled to a new crop year.


BASIS CONTRACTS:
Must be priced during Chicago Board of Trade trading hours on or prior to first delivery notice day of the contract month, unless previous arangements havebeen made.
The customer can be advanced up to 70% of the contract value upon request. The customer will be responsible for maintaining 70% eqiuty of the contract.



Terms & Condition's
  
Additional Terms and Conditions for Purchase Confirmation / Contract
1. Controlling Terms and Conditions.     All accepted purchases are expressly limited solely to the terms and conditions set forth herein.  Buyer hereby objects to any additional, different, or inconsistent terms which may be set forth in any other document you may at any time submit to Buyer, and no such additional, different or inconsistent term shall be a part of this Confirmation or shall otherwise have any force or effect whatsoever, unless otherwise agreed to in writing by Buyer.  Your signature on this Confirmation, your failure to return a signed copy of this Confirmation or to deliver to Buyer written objections hereto within 5 days from the date Buyer mails this Confirmation to you, or your acceptance of payment from Buyer for Commodity shipped to Buyer pursuant to this Confirmation will in any event constitute an acceptance by you of these terms and conditions of sale.  Accepted purchases cannot be cancelled without Buyer written consent, which consent may be conditioned on you paying a cancellation charge as determined by Buyer in its sole discretion. The parties may agree to defer the time for delivery and payment under this Confirmation which deferral shall be in writing.
2.   Commodity Specifications.    Commodities delivered under this Confirmation shall: be graded in accordance with State and Federal laws and in accordance with any standards set by Buyer; be merchantable and not be adulterated; meet such additional specifications and standards as Buyer may establish from time to time, including without limitation standards and specifications related to test weight (determined with reference to moisture content), foreign material and mycotoxin and other toxin levels. Buyer may, at its option: reject any Commodity delivered by you that does not meet these specifications, with any cost of redelivery incurred by Buyer to be paid by you or accept Commodity delivered by you that does not meet these specifications on such discounted pricing terms that Buyer may reasonably determine.  
3.   Title and Risk of Loss/Acceptance.   Title to and risk of loss of the Commodity shall pass from you to Buyer when the Commodity is delivered at the Delivery Point. You provide for and grant to Buyer a security interest in and lien upon the Commodity to secure delivery of Commodity, and you authorize Buyer to file at anytime with the appropriate filing office(s) any and all financing statements required or that Buyer deems appropriate in order to perfect such security interest. .
4. Warranties; Limitation of Remedies.       Unless you otherwise inform us in writing, you warrant that Commodities sold under this Confirmation shall be free and clear of any security interest, lien, penalty, charge, or encumbrance, governmental or otherwise. Buyer shall have the right to name the secured party as co-payee with you on any payment for the Commodity and to deliver such payment to the secured party. You represent that the sale of the Commodity is not in violation of any agreement or license that you have with any other party and that you are knowledgeable and experienced in the sale of Commodities. You acknowledge that premiums and/or discounts may apply to certain transgenically enhanced varieties delivered against this Confirmation, even if the Commodity meets all other grade and quality specifications set forth in this Confirmation. You agree that your sole and exclusive remedy against Buyer for breach of this Confirmation and for purchase and use of the Commodity shall be, at Buyer's sole election, either replacement of the Commodity or payment of the purchase price as determined herein without interest.  UNDER NO CIRCUMSTANCES OR THEORIES, INCLUDING WITHOUT LIMITATION, STRICT LIABILITY, BREACH OF CONTRACT, AND NEGLIGENCE, WILL BUYER BE LIABLE TO YOU OR TO ANY OTHER PERSON FOR ANY ACTUAL, ORDINARY, EXEMPLARY, SPECIAL,   INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR OTHER DIRECT OR INDIRECT DAMAGES, LOSSES, COSTS, OR EXPENSES WHATSOEVER, EVEN IF BUYER KNEW OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF ANY OF THOSE DAMAGES, LOSSES, COSTS, OR EXPENSES. From and after its acceptance by Buyer, you agree to indemnify, defend, and hold harmless Buyer and its agents and employees from and against any claims for damage, loss, or personal injury caused by the Commodity.If Buyer rejects any Commodity tendered for delivery, Buyer is not liable for damages, provided Buyer has performed in good faith in the establishment of quality specifications and in the inspection and rejection of Commodity tendered for delivery. If Buyer rejects any Commodity tendered for delivery, you may not withhold future scheduled deliveries.  Upon non-delivery, Buyer shall have all rights and remedies of a secured party under the Iowa Uniform Commercial Code, including the right to take possession of and resell the Commodity, to cover your non-delivery of the Commodity by acquiring substitute Commodity, credit the amount of damages you are obligated to pay Buyer and offset your liability against any account balances or other amounts owing to you.
5. Insecurity Regarding Seller’s Performance.     If Buyer determines that reasonable grounds for insecurity with respect to your performance exist or you are in default under this Confirmation or any other contract with Buyer, upon Buyer written demand sent to your address for Notices, you shall give to Buyer assurance of performance satisfactory to Buyer and Buyer may hold payments until such grain or assurance is received. You shall make no deductions (including those for alleged damages) from payments due hereunder.
6. Margin Maintenance Requirements. You agree that if your sale of Commodity hereunder is a forward cash contract, then Buyer may sell a corresponding futures contract to a broker subject to margin maintenance requirements.  You further agree that if the broker later requires Buyer to contribute additional capital to its brokerage account to restore the initial margin, then Buyer may likewise require that you contribute within 48 hours a corresponding amount of cash to Buyer pending the completion of the contract. 
7. Attorneys Fees and Costs.     You agree to pay all costs and expenses incurred by Buyer incurred to enforce this Confirmation, including costs and reasonable attorneys' fees, whether before, during, or after any court proceeding, arbitration, or any bankruptcy/insolvency proceedings, at trial or appellate court levels, or otherwise.
8. Assignment.    You may not assign this Confirmation without Buyer's prior written consent. If Buyer consents to an assignment, you shall remain liable and responsible for the due performance of all of the terms, covenants, and conditions of this Confirmation. The terms of this Confirmation shall be binding upon and shall inure to the benefit of the parties hereto, Buyer successors and assigns. Nothing in this Confirmation, express or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, liabilities, or obligations under or by reason of this Confirmation.
9. Entire Agreement.     This confirmation constitutes the entire agreement between the parties hereto pertaining to the subject matters hereof, and supersedes all negotiations, preliminary agreements, and all prior or contemporaneous discussions and understandings of the parties hereto in connection with the subject matters hereof. No course of
dealing or usage of trade shall be relevant or admissible to supplement or vary any of the terms of this Confirmation.
10.Force Majeure.    Notwithstanding anything in this Confirmation which may appear to be to the contrary, if any term or condition of this Confirmation to be performed or
observed by Buyer is rendered impossible of performance or observance or commercially unreasonable due to any Impossibility Event (as hereafter defined), Buyer, for so long as such condition exists, shall be excused from such performance or observance, provided Buyer promptly notifies you in writing of the Impossibility Event relied upon for the
invocation of this Section. For purposes of this Section, the term "Impossibility Event" includes, without limitation, fire, storm, flood, earthquake, acts of God, civil disturbances or
disorders, war, computer failures, computer viruses, acts of computer hackers, sabotage, strikes, lockouts, labor disputes, labor shortages, stoppages or slowdowns initiated by
labor, transportation embargoes or stoppages, manufacturing plant breakdowns or slowdowns, failure or shortage of the Commodity, or any other act, omission, matter, circumstance, event, or occurrence beyond the reasonable control of Buyer.
11. Notices.   All notices, requests, claims, demands and other communications hereunder shall be in writing. Such “Notices” shall be given (i) by delivery in person (ii) by a nationally recognized next day courier service, (iii) by first class, registered or certified mail, postage prepaid, (iv) by facsimile or (v) by electronic mail to the address of the party specified in this Confirmation or such other address as either party may specify in writing. Notices so given shall be effective upon (i) receipt by the party to which notice is given, or (ii) on the fifth (5th) day following mailing, whichever occurs first. The address for Notices shall be the addresses of the parties set forth on the reverse side hereof.
12. Governing Law/Resolution of Disputes.    This Confirmation shall be governed by the trade rules of the National Grain & Feed Association (NGFA) unless otherwise provided herein, and to the extent not inconsistent with such rules, this Confirmation shall be governed by and construed in accordance with the laws of the State of Iowa, including the Iowa Uniform Commercial Code, but without regard to provisions thereof relating to conflicts of law. The parties to this Confirmation agree that the sole remedy for resolution of any and all disagreements or disputes arising under or related to this Confirmation shall be through arbitration proceedings before the National Grain and Feed Association (NGFA) pursuant to the NGFA Arbitration Rules.  The decision and award determined through such arbitration shall be final and binding upon Buyer and Seller.  Judgment upon the arbitration award may be entered and enforced in any court having jurisdiction thereof. (Copies of the NGFA Trade Rules and Arbitration Rules are available from NGFA, 1250 Eye Street, N.W., Suite 1003, Washington, D.C. 20005; Telephone: 202-289-0873; Website: http://www.ngfa.org). Each of the parties irrevocably consents to the service of any and all process in any such action or proceeding by the delivery of copies of such process to each party, at its address specified for Notices to be given hereunder.  
13. Miscellaneous,    No provision of this Confirmation can be waived except by written consent. Any waiver by Buyer or seller shall not be deemed a waiver of future
compliance therewith, and such provisions shall remain in full force and effect. This Confirmation shall not be construed more strongly against any party, regardless of who was
more responsible for its preparation. Phrases herein shall be construed as in the singular or plural number and as masculine, feminine or neuter gender, according to context. The use of the words "herein," "hereof," "hereunder", and other similar compounds of the word "here" refer to this entire Confirmation and not to any particular paragraph, Section or provision. The parties may execute this Confirmation on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same agreement. All sales, excise or other taxes or fees which affects this Confirmation or sales of the Commodity will be your responsibility and expense. Should any term be held invalid, void or unenforceable, the remainder of the terms and conditions shall remain in full force and effect, and such term that is deemed to b
e invalid, void or unenforceable shall be deemed amended to the extent necessary to render such provision enforceable to the greatest permissible extent.
 


Helpful Information on Contract Types and Usage:
 
  • Cash (Spot) - Is the most commonly used contract. Through this type of sale a producer receives the spot price at the end of the day of delivery. The only arrangements needed prior to delivery are that you are register in our computer system. The producer can choose to receive payment for their grain.
     
  • Forward Delivery Contract - The Forward Delivery Contract allows the producer to lock in an elevator's deferred cash grain price. It locks in both futures and basis and setting the delivery period. This contract is used to establish a crop selling price in a future delivery period.
     
  • Basis - A Basis Contract is priced in two distinct steps. The initial contract specifies the bushel amount, the delivery period and the "basis" relative to a particular futures option month. This contract allows the seller to partially lock in a future delivery price. The part of the price that is fixed is the basis. The "Basis" is the difference between the cash price and the futures on the CBOT. The futures price is to be set at a future date. Delivery of grain can be made without pricing the CBOT futures price.
     
  • Price Later (or Delayed Price) - The Priced Later Contract, also called Delayed Price, or No Price Established, allows a high degree of price flexibility for an extended period of time. Price Later is an un-priced contract whereby you deliver the grain and have until a later date to establish the final flat price. A service charge may apply. Also, title of the grain passes upon delivery to the elevator. 
     
  • Futures Only (or Hedge-to-Arrive) - The Futures Only Contract, like the basis contract, is priced in two distinct steps. The initial contract establishes the bushel amount, the delivery period and the futures price. The basis then must be locked-in prior to delivery. Once the basis has been locked-in, the contract becomes a cash contract. A service charge will usually apply.
     
  • Minimum Price - Minimum Priced Contracts are a very safe opportunity for the producer to participate in market movement for further profit. The producer should use this when anticipating a favorable market move which will enhance his base price while protecting a minimum price should the market not move as anticipated.
     



    Table 1. Risk Exposure with Various Grain Pricing Alternatives and Contracts. 

    Pricing

    Alternatives

    Areas of Risk Exposure

    Industry

    risk rating

     

    Price

    level

    Basis

    Intra-year

    spreads

    Inter-year

    spreads

    Options

    volatility

    Production

    risk if pre-harvest

    Tax

    risk

    Counter

    party risk

    Control

    risk

     

    Cash market

    X

    X

    X

     

     

     

     

     

    X

    Moderate

    Forward cash

     

     

     

     

     

    X

     

    X

     

    Low

    Basis

    X

     

    X2

     

     

    X

    X

    X

    X

    Moderate

    Price later

    X

    X

     

     

     

    N/A

    ?

    X

    X

    Moderate

    HTA: non-roll

     

    X

     

     

     

    X

    X

    X

    X

    Low

    HTA: intra-year roll

     

    X

    X

     

     

    X

    X

    X

    X

    Moderate

    HTA: 1 year

    inter-year roll

     

    X

    X

    X

     

    X

    X

    X

    X

    High

    HTA: multi-year

    inter-year roll

     

    X

    X

    X

     

    X

    X

    X

    X

    Extremely

    High

    Minimum price

     

     

     

     

    X

    X

    X

    X

    X

    Low

    1 An X in the table cell indicates the pricing alternative has significant exposure to the risk.
    2 Spread risk occurs if spreads change because of action in nearby futures, but basis contract is based on a later futures contract month, such as July. Narrowing spreads would mean the cash and nearby futures prices could rise more than the price obtained from the basis contract. Also, on rare occasions, basis contracts are rolled to provide the farmer with a longer period for choosing a price. This can involve spread risk if rolled to a later crop year, but nearby prices do not follow distant futures price moves.

    Adapted from National Grain and Feed Association, "Hybrid Cash Contracts" white paper, April 1996. 

    Table 2. Types of Risk. 

    Price-level risk- the risk that futures prices will change in an adverse direction from the present level. This risk typically is large and difficult to predict.

    Basis risk- the risk that the difference between the local cash market and the futures price will move in a direction that reduces the net price to the seller. This risk usually is much smaller than price level risk and inter-year spread risk. For major crops such as cotton, corn, soybeans and wheat there is a strong seasonal pattern, although transportation problems and other unforeseen developments can alter its seasonality.

    Spread risk- the risk that price differentials between nearby and distant futures will move in a direction that reduces your net price. This risk can be divided into intra-year and inter-year spread risk. Spread risk within a single crop year normally is relatively small, but it can be sizable in years when supplies are extremely tight. Inter-year spread risk is much larger and unpredictable. Its volatility increases sharply when supplies are small. This risk is involved when using hedge-to-arrive contracts that involve rolling the delivery date forward.

    Market volatility risk with minimum price contracts- the risk that the net price on such contracts will not change one-for-one with cash and futures prices as the price level rises. The same kind of risk exists with maximum price contracts used for feed purchases. The size of this risk varies with market volatility, distance  between options strike price and the underlying futures price, and the length of time until contract delivery. It tends to be largest with volatile markets and when the delivery date is several months away.

    Tax risk- includes the risk of whether futures or options-based losses in contracts will be ordinary business expenses or capital losses, as well as other tax issues. For individuals, a maximum of $3,000 per year can be deducted as a capital loss unless offset by equal amounts of capital gains. Provision is made to carry capital losses forward to later years. For corporations, no capital loss is deductible unless matched by capital gains. Elevator contracts typically do not separate these price components, but tax issues can still be critical.

    Counter party risk- the risk that the buyer will be unable to perform part or all of his or her contractual obligations or will be unable to pay for your grain. This risk is especially important for credit-sale contracts, in which the title to the grain has been transferred to the buyer but payment has not yet been made. In Texas and many other states, credit-sale contracts do not have the same financial safeguards available for storage under warehouse receipts. This risk also may be a consideration with other types of contracts.

    Control risk- the risk that contracts will get out of control. Some contracts require several stages of decision making beyond the initial contract signature. With these contracts, there is risk that market action will move your net return to an unacceptable level before you realize what is happening and can take corrective action.

    Suppose that you believe there is a good chance the level of prices (as reflected by the futures market) will rise. Also suppose that you are concerned that the basis may weaken, but would like to participate in higher prices. Alternatives for managing these risks include using a basis contract, selling the grain and buying futures  contracts, or selling the grain and buying call options.

    Suppose that you expect both the level of prices and the basis to strengthen. In that case, you might want to consider storing the grain, or selling on a delayed price contract or minimum price contract. If you expect both  the futures price and the basis to weaken, you might want to consider selling the grain immediately in the cash market or forward contracting. When you expect the level of prices to decline but the basis to strengthen, risk management alternatives include sales on (non-roll) HTA contracts or sales on futures contracts. Local basis patterns and market conditions must be studied to successfully anticipate basis changes. Consider minimum price contracts when you are unsure of the direction that price levels will change but believe there is a good chance prices will rise. Minimum price contracts are based on options markets. Structured in that way, these contracts give you the ability to benefit if futures market prices rise sharply.

    Figure 1. Best-fit alternatives for selected market conditions.

    Figure 1

    Adapted from NCR 215-4 "Developing Marketing Strategies and
    Keeping Records on Corn, Soybeans, and Wheat," John Ferris,
    1985. 

     

    Conclusions

    Grain contracts are important tools for managing price and income risk in the volatile price environment that exists today. Using them successfully requires a complete understanding of how various contracts work, the kinds of risk they are designed to control, and the areas of risk that remain after the contract is signed. Some contracts require only one decision: whether or not to use the contract. More complex types require one or more decisions after the contract is signed. Good business rules in grain contracting are: (1) understand the contract before you sign it; (2) know and communicate with the firm or individual with whom you are doing business; and (3) understand the decision processes required for successfully using the contracts you select.

    References

    Todd E. Kemp. "Hybrid Cash Grain Contracts: Assessing, Managing and Controlling Risk," white paper. National Grain and Feed Association. April, 1996.

    John Ferris. "Developing Marketing Strategies and Keeping Records on Corn, Soybeans, and Wheat," NCR 215-4. December, 1985.

    This publication was adapted from "Commonly Used Grain Contracts", PM1697A. Robert Wisner and Ed Kordick, December, 1996.
     

     

    Disclaimer

    This publication provides information to help you understand risk management features of grain contracts. It is neither a legal document nor an endorsement of any type of contract by The Texas A& M University System. Contract provisions vary and some contracts may have provisions not discussed here. Seek professional assistance if there are details you do not understand. Before entering into the contract, each individual should evaluate his or her risk exposure with extreme market movements.





















     

 
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