Cash Forward Contracts

Purpose:

To establish a market price for future delivery.

When To Use:

1. When you feel the market is at a good price.
2. When you feel the market is going lower.
3. When you need to move grain.

Advantages:

1. Simple and straightforward procedure
2. Can be priced for a delivery period far in the future.

Disadvantage:

1. There is no potential improvement if the market goes up or if basis improves

Execution:

1. Establish a price for delivery at a later date.
2. Deliver grain during the stated deliver period.
3. Collect for the grain after delivery.