Grain

Is a Bonus Premium Contract Right For You?

Grain Contract Matrix 120817 V1

Is a Bonus Premium right for you? 

Did you know that we have a program focused on Old Crop sales that will add money to your cash price? This program, called Bonus Premium, is available regardless of whether your bushels are in the elevator or in your bin. The one stipulation is that this only works in 5,000 bushel increments, and you must be willing to give us a FIRM, NON-NEGOTIABLE offer for New Crop, when you are pricing Old Crop. 

As an example, from earlier this week, we would add 15 cents to your Old Crop corn sale, if you would give us an offer against the March 2021 corn futures at $3.62. That offer would expire on February 19, 2021. In essence, you are saying that if on 2/19/21, March 2021 corn futures close the day AT OR ABOVE $3.62, you would sell us an additional 5,000 bushels at $3.62 futures. The delivery period you choose at that time would dictate the basis level used to arrive at a cash price. On the other hand, if the March 2021 corn futures close below $3.62, you would owe us nothing further. You keep the 15 cents, and we’re all good. At the time of this writing, March 2021 futures were around $3.46.

To be fair, this does carry some risk for you, because when we get to February 19, 2021, March corn futures could be substantially above $3.62. The question you need to ask yourself, and we’ve been asking ourselves, is “what is the likelihood of that happening?” With a large amount of corn acres being planted, and a lot of them at record pace, how large will this crop be? Will most of the “normal” demand be in place before too long? Will the U.S. be struggling with a mountain of corn and relatively few places to use it? 

We would normally advise people to hold off on this program until the offer level is at or above $4.00 futures. But with the way this market has been acting, we’re adjusting our targets somewhat lower for the 2020/2021 crop. If you would like more information on this program and updated information on the offer level, please contact your local Grain Marketing Advisor.