Fremar LLC

Mission Statement: TO ANTICIPATE, MEET OR EXCEED OUR PATRON'S EXPECTATIONS WHILE PROVIDING LOCAL PROFITABILITY.

Grain - Feed - Agronomy - Petroleum         605-648-3941 or Toll-Free: 800-658-3544, Fax: 605-648-3943
General Manager: Steve Domm                                                      Main Office Hours: Monday - Friday    7:30 AM - 5:00 PM
Main Office: 44608 - 273rd Street, Marion SD 57043                                                                             Closed Saturday & Sunday

	Contracts

FUTURES HEDGING / SELLING FUTURES

FEATURES * Delivery at a Later Date * Futures Market Portion Priced at Time of Trade Execution; Acts as Substitute for Cash Transaction * Basis Priced at a Later Date * Payment Received Upon Delivery of Grain and Profit/Loss from Futures Transaction is Realized

DEFINITION

This marketing alternative affords the seller of grain the ability to sell (hedge) a substitute (futures contract) rather than selling actual or planned inventories. The liquidity of the futures market affords the ability to enter and exit a trade in an efficient fashion. The seller of grain is able to use the sale of grain futures as a hedge against futures price declines. The selling of futures as a hedge is suitable for use if the seller of grain feels grain prices will fall in the futures or if the seller of grain simply desires to lock-in an operational margin.

ADVANTAGES

* Allows the seller of grain the ability to lock-in a futures market selling price. This is an appropriate alternative if the seller of grain feels grain prices will fall in the future or if the seller of grain simply desires to lock-in an operational margin.

* Allows the seller of grain the ability to market grains to the best market at the time of shipment.

* Allows the seller of grain the ability to benefit if the seller is anticipating a basis rally.

* Allows the seller of grain the ability to lock-in favorable futures market carrying charges when available.

* Allows the seller of grain, the selling price, and the amount to remain anonymous.

DISADVANTAGES

* The selling of futures as a hedge does not allow the seller the ability to benefit from future price rallies.

* The selling of futures as a hedge does not eliminate the risk one has in the basis portion of the pricing.

* Monies may be tied up in margining the futures account until physical grain is delivered and sold.

EXAMPLE On March 1st, the December futures level for corn is $2.50. You like the futures level, but you are worried about contracting with FREMAR because you don't have any corn planted yet and the weather is in a dry pattern. You decide to set up a hedge account with FREMAR and sell 2 contracts of December corn at $2.50. This is a paper hedge so you are not obligated to deliver any corn to FREMAR.