Will Sliding Corn and Soybean Prices Reverse Course?
December 21, 2023
Both corn and soybean prices show signs of change, with pressure to trend lower, but, strong animal feed and renewable fuel demand might bring some relief. If so, when?
1×2 Contract
Instead of selling your grain at the market price today, the 1×2 contract sets a minimum (floor) and maximum (ceiling) price, with a final pricing date determined at the time of contracting. If prices go lower, you are protected by the floor, and if prices go higher, you maintain participation and may sell additional bushels.
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How It Works
How It Works
- You choose the number of bushels you want to price and the delivery period.
- You specify the floor and ceiling prices for the final pricing date.
- The Futures Reference Price will be established on your contract on the final pricing date you specified. If the market settles:
• Above your ceiling price, then double the original contract quantity will be priced at the ceiling price
• At or below your ceiling price but above your floor price, then the original contract quantity will be priced at the market settlement price
• Below your floor price, then the original contract quantity will be priced at your floor price - You deliver your contracted grain and receive the final cash price.
Benefits
Benefits
- Ensures a minimum futures reference price for your grain
- Helps you achieve target price levels regardless of subsequent market conditions
- Offers upside potential while protecting you from downside
- Executes automatically on the pricing date
- Provides certainty on a portion of your grain production
Contract Choices
Contract Choices
The 1×2 contract can be applied to any new contract today, for bushels to be delivered at a specified date.
You can work with your ADM representative to determine these components:
- Number of bushels contracted
- Maximum price (ceiling)
- Minimum price (floor)
- Delivery date(s)
Performance
1×2 contracts perform according to the formula put in place, referencing a defined underlying futures reference market and price, on a specific pricing date to determine whether or not an additional bushel obligation will occur.
Double-Up Feature
If the market settles above your ceiling price, then double the original contract quantity will be priced at the ceiling price.
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