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DELAYED PRICE Contract
The seller delivers grain to the receiver and is issued a delayed pricing contract. The seller can price the grain in the future at his/her discretion up until the final delayed pricing date. Normally the issuer of the contract will assess a monthly service charge that is comparable to monthly storage rates. The title of the grain passes to the receiver upon delivery of the bushels.
ADVANTAGES
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Allows the seller of grain to deliver at a time that fits the seller’s desired shipment date.
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Allows the seller to price the grain at a later date and benefit if the market rallies.
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This alternative may eliminate the sellers risk of quality deterioration of stored grain.
DISADVANTAGES
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Does not provide payment until the contract is priced.
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Provides no protection to the seller of grain in the event the market declines prior to pricing.
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The seller generally will pay a monthly service charge for this contract.
EXAMPLE On October 1st, Fremar quotes cash corn at $5.00 for corn. You believe prices will improve over the next few months and your bins are full, so you haul corn in at harvest and put it on a delayed price contract. The service charge is 5 cents per month and the pricing deadline is June 30th of the following year. On February 1st, cash corn is $6.25. You are satisfied with this price and decide to price your contract. Your net selling price would be $6.05 (6.25 - .20 service charge).
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