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Am I the only one who fills my forward contracts if the market goes up?
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tim4870
Posted 11/16/2012 11:44 (#2700436 - in reply to #2698985)
Subject: RE: Am I the only one who fills my forward contracts if the market goes up?


Southern MN
Typically to get out of a contract, you need to pay the current market price because the elevator needs to now source that corn from someone else and the only way they can do that is to pay the current market price. In addition, they'll probably charge you an additional 10 cents a bushel for the inconvience. So if you contracted at $5, current price is $7, you'll probably be charged $7.10 to get out of the contract.

If you contracted at $7 and the current price dropped to $5 and you could not deliver, you would find someone else with corn, buy it from them for something over $5, sell it to the elevator for your $7 and keep the difference between $7 and whatever you offered to the person you sourced the corn from.

Bottom line is that there is a contract in place, that's about as good as a firm handshake.
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