Columbia Grain is here to help you cultivate greater returns. Our extensive expertise in contract execution is backed by over 40 years of experience, helping producers like you to navigate changing market conditions around the world.
HEDGE-TO-ARRIVE CONTRACT
Hedge-to-Arrive contracts are typically used when the Futures price of a cash contract is “high” and you think the Futures prices will begin to trade lower. A Hedge-To-Arrive (HTA) contract is locking in one side of the cash grain sale – when you write an HTA you are locking in the FUTURES side of the cash contract for a specific month and establishing the basis at a later date (no later than the 15th of the month preceding the futures month used) anticipating basis to become stronger. (HTAs must be completed when futures markets are actively open and trading in 5,000 bushel increments).
PROS:
- Eliminates downside futures price risk
- Basis can strengthen, giving you a better cash price than on original HTA start date
CONS:
- Eliminates any increase in futures prices on the bushels you have sold
- Basis can weaken, giving you a lower cash price than on the original HTA start date
FUTURES + BASIS = CASH PRICE
Example: Futures bids on January 15
Exchange traded futures for: Corn
| Futures Month | Futures Price | + | Basis | = | Potential Cash Price |
|---|---|---|---|---|---|
| December | $5.50 (you lock this in) | -.50 (remains open) | $5.00 |
On January 15th, December corn futures are trading at $5.50 and you choose to lock in this part of a cash sale contract – anticipating that the basis will strengthen at a later date. Let’s say August 15th rolls around and your local CGI facility has changed its basis for December corn from -.50 to +.10 against the December futures – you can now “set your basis” at +.10, giving you a gross cash contract of $5.60 (which is .60 cents better than what you could have originally sold on January 15).
| Futures Month | Futures Price | + | Basis | = | Cash Price |
|---|---|---|---|---|---|
| December | $5.50 (locked in already) | +.10 ("set your basis") | $5.60 |
Practice Sheet
| START HTA | ||
|---|---|---|
| Futures Price (Locked): | ||
| Basis (Current CGI Basis): | + | |
| Cash Price: | = |
| SET YOUR FUTURES | ||
|---|---|---|
| Futures Price (Set Your Futures): | ||
| Basis ("Set Your Basis"): | + | |
| Cash Price: | = |
*New Crop cash contracting must have basis levels available for contracting time frame. This material should be construed as examples of potential uses of marketing tools offered through Columbia Grain and not as trading advice – marketing grain involves substantial risk; you should fully understand that risk before contracting your grain in any marketing tool provided through Columbia Grain – Columbia Grain reserves all rights under the NGFA. Please consult with your local CGI merchandiser on cost associated with this contracting option.