Hedge-To-Arrive Contract

Purpose:

To lock in a futures price without establishing a basis.

When To Use:

1. When you think the market is peaking and heading lower
2. When the CBOT is satisfactory, but the basis is poor.
3. When the sellers do not choose to use the CBOT themselves.

Advantages:

1. No margin calls.
2. Allows for basis improvement.

Disadvantages:

1. Futures could go higher.
2. Basis could widen, causing a lower cash price.

Execution:

1. Lock in futures price during the regular trading hours on the CBOT.
2. The basis portion of this contract must be set prior to delivery
3. Payment occurs after the grain is delivered

A Hedge-To-Arrive contract can be used under the following guidelines:

1. The CBOT price must be established during a regular trading hours.
2. The delivery date must be agreed upon.
3. There will be a fee of 2 cents per bushel on all Hedge-To-Arrive Contracts.
4. Wheat Must be Sold in 5,000 Bushel Increments.