A Forward Price Contract is when the seller agrees to deliver grain a specified future date at a specific flat price.  The quantity, price and delivery period are established in a contract.

Advantages:

Ÿ         Quantity, price and delivery are set based on the seller’s pricing goals and delivery needs.

Ÿ         Seller can take advantage of good prices in the market to set contract and avoid the typically low prices available at harvest time.

Ÿ         Seller can lock in price before crop is planted or harvested.

Ÿ         Allows seller the ability to sell and deliver grain at a time when transportation is generally more available.

Disadvantages:

Ÿ         Risk of price decline is eliminated, however, seller cannot benefit from future market rallies.

Ÿ         Grain must be delivered as contracted regardless of yield or quality concerns.