Forward Sales / Cash Contracting / OTC Contracts
Cash contracts are legal contracts between producers and end buyers like elevators, typically in the form of contracts like HTAs (hedge to arrive), accumulators, price floors, and simple forward cash sales. These contracts are utilized as price / risk management tool in addition to or in place of traditional futures accounts and insurance products, allowing complex option based strategies and hedge methods without the need for funding a futures account and posting margin.
Why RCM Ag Services for Cash Sales?
As an independent advisor to producers, RCM Ag Services is not locked-in to any one elevator, with the ability to price basis across your region to find not just the best price, but also seek out unique financing through forward sales, OTC contracts, and more. Let our team do the leg work of finding the best buyer for you at the best terms.
- Forward price grain:
Producers are able to forward price grain by locking in price and/or basis, purchasing average pricing contracts, and more all ahead of time.
- No margin required:
The elevator is responsible for establishing the futures positions and putting up the margin.
- Transaction costs:
These costs are typically higher on contracts than a typical brokerage trade due to the higher cost of capital to the elevator for providing the margin financing.
- Counter party risk:
If the elevator goes bust the contract is at risk – call our team to review additional options
*All payments to the farmer come from the elevator – liquidity risk between time of delivery and payment is the risk.
Examples of types of Forward Sales/Cash Contracts
- Hedge to Arrive (HTA) – Set futures price with physical or virtual elevator
- Basis Contracting – Set delivery location and basis
- Fixed Price Contract – Set futures price and set basis
Examples of OTC Contacts
Lookalike options and futures – customers have the full flexibility of traditional futures and options transactions.
With structured products, more commonly referred to as Accumulators, these products allow a customer to accumulate forward purchases or sales above or below the current market tied to agreed upon restrictions. There are many different types of accumulators including those that allow for price protection and others that will double up purchases or sales.
Some examples include:
- Double up
- Weekly double up