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Grain Contracting Strategies to Induce Delivery and Performance in Volatile Markets

Published online by Cambridge University Press:  26 January 2015

William W. Wilson  and
Bruce Dahl
William W. Wilson
Affiliation:
North Dakota State University, Fargo, ND
Bruce Dahl
Affiliation:
North Dakota State University, Fargo, ND
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Abstract

One of the impacts of higher prices along with greater volatility in futures and basis is that there is pressure for an escalation in cash contracting for grain. This volatility has resulted in an unprecedented level of contracting with growers in recent years. There is a wide array of cash contracts with varying terms. There is also a growing realization of growers not delivering on contracts, in part due to escalation in postcontract prices. These are evolving as major strategic issues for buyers and the marketing system, particularly as buyers seek to use such contracting strategies as an element of risk mitigation. There are three purposes of this article. First is to provide a broad survey of contract terms used in grain contracting with growers. Second, we illustrate some issues in contracting of some of the grains (durum, malting barley) in the upper Midwest. Third, we show some of the common contract clauses being adapted in these contracts. Finally, we summarize these issues with respect to industry implications.

Keywords

grain contractingriskvolatilityC15D81Q12
Type
Invited Paper Sessions
Information
Journal of Agricultural and Applied Economics , Volume 41 , Issue 2 , August 2009 , pp. 363 - 376
Copyright
Copyright © Southern Agricultural Economics Association 2009

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