Grain Marketing
101
Shannon Dill
Extension Educator, Ag & Natural Resources
University of Maryland Cooperative Extension
Talbot County
Objectives
Marketing Terminology
Where to get Grain Marketing Information
Making Trading Decisions
Marketing terminology
Futures
This is the national price set for grain
This is the price that all grain is quoted on nationally
Most futures contracts do not result in physical delivery.
A futures contract is done through a broker in 5,000bu increments
and requires a fee
Marketing terminology
 Cash Price
This is the local price quoted for grain by individual buyers
It requires delivery
Does not need a broker, no fee and no bushel limits
Marketing Terminology
 Basis
 is the difference between a cash price and a futures price of a
particular commodity on a given futures exchange.
 It is calculated as:
 Basis = cash price - futures price
 Basis can be positive or negative.
Marketing terminology
 Marketing contracts
 Futures Contract
 is a contract traded on the futures exchange for the delivery of a specified commodity at a future point
in time. Most futures contracts do not result in physical delivery. An offsetting transaction usually
occurs prior to delivery and any price differences are settled in cash.
 Forward Contract
 is a contract for the cash sale of grain at a specified price for future delivery.
 Hedge to Arrive
 Is a contract for the cash sale of grain which locks in the futures price at the date of contracting, the
basis can be locked in later.
 Basis Contract
 is an agreement between a producer and grain elevator (or feedlot) that specifies the cash price upon
future delivery as a fixed amount in relation to the futures price (above or below), thus fixing the basis
 Options – Put or Call Contracts, tools for creating price floors or upside potential.
Requires broker and 5,000 bu contracts
Grain Prices and Information
Web resources:
Chicago Board of Trade now the CME Group
http://www.cmegroup.com/trading/agricultural/
Ag Web
http://www.agweb.com/markets
Lots of other commentary and local elevators
Popular press and market experts
Marketing terminology
Bear
is a person who expects higher prices.
Bearish Market
is a market in which prices are declining.
Bull
is a person who expects higher prices.
Bullish Market
is a market in which prices are increasing.
Marketing terminology
Futures month
◦ The month at which the future trade
◦ Corn
◦ Harvest – Dec
◦ Store - JFM
◦ Soybeans
◦ Harvest - Nov
◦ Store - JFM
◦ Wheat
◦ Harvest - July
Marketing tools
 Using Crop Insurance
 This allows you to contract with confidence
 https://extension.umd.edu/grainmarketing/crop-insurance
Crop Budgets
 Need to know cost of production
 Need to know break-even price you must receive
 http://extension.umd.edu/grainmarketing/crop-budgets
Crop Insurance
Crop Budgets
Marketing Plan
 Winning the Game – Center
for Farm Financial
Management
 Set a minimum price
 Set decision dates to make
pricing decisions
Thank You!
SHANNON DILL
SDILL@UMD.EDU
410-822-1244
HT TPS://EXTENSION.UMD.EDU/GRAINMARKETING