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FAQ's: Minimum Price Contracting

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FAQ's: Minimum Price Contracting

Which marketing period should I choose?
It is generally better to do Minimum Price Contracts for shorter periods of time.  You will spend less money and will be tied to the nearby futures, which in a rally tends to have greater upside potential than the deferred months.
How do I execute pricing to receive additional money?
It is your responsibility to notify Buchheit when you would like to execute the final pricing.  Upon your request for pricing, Buchheit will note the current futures price and pay you the difference between it and your minimum price.
When do I get paid?
You will be paid the minimum price at the time of delivery.  The additional money due as a result of pricing depends on the circumstances.  If the contract is priced prior to delivery, the additional gain is added to the minimum price and paid upon delivery.  If the bushels have already been delivered and the minimum price paid, the additional gain is paid separately at the time of pricing.
When to I pay the cost?
In order to keep Minimum Price Contracting as simple as possible, Buchheit automatically figures the cost of the opportunity to have a Minimum Price Contract into your minimum price.  You will not write a check for this opportunity!  Upon delivery, you will receive the minimum price listed on the contract, plus any additional gain in the futures market.
How many bushels should I contract using minimum price?
Buchheit encourages you to contract a portion (1/4 or 1/3) of your crop using Minimum Price.  The best marketing move would be to Forward Contract 1/3 of your crop and use Minimum Price on 1/3. This way 2/3 of your crop is sold!  When 2/3 of your crop is sold, you eliminate 2/3 of your risk of not selling at profitable level.
What happens if the market goes lower?
If upon reaching the expiration date, prices are lower (and you had not previously exercised your option) the contract expires, and no further action is required.  You will be paid your minimum price upon delivery.
What if I can’t deliver?
Remember- Buchheit encourages you to only dedicate a portion of your crop to Minimum Price Contracting.  If you are still unable to deliver cancellation can be applied (if final pricing has not yet occurred) or until the expirationOnce pricing occurs, the contract becomes a forward contract in which rollover rules apply.
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