Every time a few years of high prices are followed by a few years of lower prices, grain origination reaches a tipping point where we start to hear a distant groaning as contracts that were put to rest when buying was easy start to crack open the lids of their flimsy coffins, climb out of the earth, and stumble their way into town to roam the streets once more.
These particular zombies aren't feasting on brains; they are offering premiums.
Maybe the premium comes with a price floor - but also a price ceiling.
Maybe it comes with a ghost - the possibility, but not certainty, that you will sell more bushels than originally contracted.
Maybe it comes without a price floor, and also the possibility that you will sell fewer bushels than contracted.
Maybe you could end up with bushels contracted for multiple crop years.
Maybe, maybe, maybe.
For the more traditional brain-eating style of zombie, an armored vehicle or sawed off shotgun might be the weapons of choice.
For these newly risen contracts, awareness and understanding are the most valuable defense.
There is no premium without some limitation, obligation, or uncertainty.
Make sure you know what those are before you use these kinds of contracts. Make sure all involved parties understand how they work and can explain them to each other clearly. You probably want to give your accountant a heads-up, too.
Don't let the premium get all the attention - the hand that is offering it is attached to a zombie, and sooner or later, a zombie wants to bite you.
Sherry Lorton : Oct 16, 2019
