How Missouri Farmers Secure Soybean Prices with Contracts

By Blake Jackson

For Missouri soybean farmers, managing price risk is crucial amid market volatility caused by unpredictable weather, global conflicts, and shifting policies.

Various marketing tools such as forward contracts, futures, hedge-to-arrive (HTA) contracts, basis contracts, and options can help secure profits and reduce uncertainty. Each tool offers different benefits, depending on market conditions and individual farm needs.

Forward contracts are the most popular choice among Missouri producers. These agreements with local elevators or processors fix the price for a specified quantity of soybeans to be delivered in the future.

Forward contracts provide price certainty when both futures and basis prices are favorable. However, they lack flexibility since producers are obligated to sell at the agreed price, even if the market improves.

Futures contracts, traded on exchanges like the Chicago Board of Trade, allow producers to hedge price risk with more flexibility but require a margin account and active management.

Futures are useful when prices are expected to drop, allowing farmers to lock in current prices while retaining options to adjust positions. Rolling futures contracts losing one and opening another with a later expiration can extend pricing opportunities but comes with additional costs and timing challenges.

HTA contracts combine features of forward and futures contracts. Producers lock in futures prices while delaying basis decisions, though the contract is tied to a specific elevator or processor, which may limit flexibility. HTA contracts protect against futures price swings but still expose producers to basis risk.

Basis contracts lock in the basis price but leave the futures price open, helping producers capture strong local prices while benefiting from potential futures market gains.

Options contracts offer a unique blend of protection and flexibility. A put option, for example, gives the right to sell at a set price without obligation, providing insurance against falling prices while allowing producers to profit if prices rise.

Though options require paying a premium upfront, they offer control and reduce financial risk compared to other tools.

A balanced marketing plan combining these tools, matched to one’s risk tolerance and market outlook, can help Missouri soybean farmers manage uncertainty. Keeping records of market decisions and reviewing outcomes can guide future improvements.

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