Marketing 101  03/17/15 2:46:43 PM

Marketing 101

If you are new to marketing crops, this page is for you!  It outlines some basic terms and explains how markets work so that you can determine your net income.

Flat Price:  The price that you receive for your crops is called the flat price.  The flat price is made up of two other prices: the futures and the basis.

Futures:  This is the price set by the Chicago Board of Trade (CBOT).  It reflects the world’s supply & demand of commodities.  This price is affected by many things including weather & political changes in countries around the world.  This price is constantly changing.  It is not set for the day.  It can change by the second.

Basis:  This is the difference between the futures price and the local price, to reflect the local demand in the market.  For example, if the CBOT price for corn was $6.00/bushel, but we needed more corn than our local area had produced this year, then our basis would add to that price.  The amount that it would add to the price would be determined by how badly our area needed corn.  The greater the need, the higher the basis. If the basis was 50 cents, then the flat price that you would receive for your corn would be $6.50/bushel.  ($6.00 + $0.50 = $6.50 or futures + basis = flat price).

The basis can also be negative, meaning that there is a decreased need for a commodity in our area.  Using the $6.00/bushel CBOT price for corn again, if the basis was -35 cents, then your flat price would be $5.65/bushel.  ($6.00 – $0.35 = $5.65 or futures – basis = flat price).

Payment:  You must have payment issued for crops that are sold as they are delivered to the elevator, or crops that are contracted ahead of time, within 10 business days.  Crops that are sold out of storage must have a cheque issued to you within 5 trading days.  We frequently issue cheques much sooner than the legal timeframe.  Cheques can be mailed to you, you can pick them up at the elevator, or you can have proceeds directly deposited into your account.  To arrange this, contact Donna at 705-930-3488 or email donna@maizeingacresinc.com.

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