Minimum Price Program
The Minimum Price Program pricing program helps you lock in the current market and remain open to upside potential.
How It Works
You contract to sell Bartlett a specified amount of grain for a specified delivery period at an agreed upon contract price. You then select a minimum price strategy to establish your desired floor level. This keeps the contract open to upside price potential while having the surety of locking in a minimum price.
On November 25, March corn futures are trading at $4.50, with the elevator posting a basis of -25 cents. You contract to sell 50,000 bushels for March delivery, at a cash price of $4.25 ($4.50 futures with a -$0.25 basis). You then choose to set your floor (minimum price) level at $4.00 vs the March futures board, which is trading for a market premium of $0.25.
Your minimum cash price on 50,000 contracted bushels = $4.00
($4.50 futures – $0.25 basis – $0.25 strategy premium)
Final Price Scenarios at Strategy Expiration
On February 24 (strategy expiration date), the futures price for March corn has rallied to $5.25. At expiration, your minimum price strategy is $.75 in the money, adding premium to the flat price to be paid on your cash contract.
Your final cash price on the 50,000 contracted bushels = $4.75
($4.50 futures – $0.25 basis – $.25 option premium paid + $0.75 strategy gains)
On February 24 (strategy expiration date), the futures price for March corn has fallen to $3.75. At expiration, your minimum price strategy expires out of the money. No premium is added to your contract but you have the confidence of knowing your bushels are locked in at the minimum price.
Your cash price on 50,000 contracted bushels = $4.00
($4.50 futures – $0.25 basis – $0.25 strategy premium paid)
Minimum Price Program Details
- You do not own an option.
The Minimum Price Contract’s floor pricing strategy is tied to the market premium of the selected strike.
- In any pricing scenario, you do not incur costs beyond the original premium plus fee.
- You may select an option strategy with a strike price and month different from your contracted bushels.