MARKET PREMIUM PLUS PROGRAM


DESCRIPTION

CGB Grain Market Solutions logo in black and goldThe CGB Market Premium PLUS allows the farmer to receive a Daily Hedge Price at a premium to thecurrent market, for no product cost. There are three levels that are defined at the start of the pricing window, the Daily Hedge Price, the Floor Price, and the Price Out Level. This program applies two quantities of bushels, fully pricing the first allotment and having the potential to price the second.

 

How it Prices Your Grain

Prices equal amounts daily based on the following rules:

    • If futures do not trade at or below Price Out Level, you receive the Daily Hedge Price.
    • If futures do trade at or below the Price Out Level, all remaining bushels are priced at the Floor Price. The Program is done and your hedge will be given back to you..
    • If futures never trade below the Price Out Level and settle at or above the Daily Hedge Price on product expiration, a second bushel commitment will be hedged at the Daily Hedge Price.
    • Your All-In Hedge Price = Simple Average of all Daily Hedge Values.

BENEFITS TO THE FARMER

    • Receiving a Hedge Price at an attractive level versus what can be achieved in the current market.
    • Even if priced out, the final hedge price achieved is likely above the market.
    • Known worst case to the downside, completely protected on base quantity.
    • An ability to receive an attractive hedge price even if the market never rallies.
    • Product Cost is zero cents per bushel.

 

FAQ

Answer: All the bushels enrolled will be fully priced. This product does not require a potential second quantity to be priced.
Answer: Your best case hedge price is the Daily Hedge Price. You will price equal quantities every day at this level as long as the market stays above the Price Out Level. At the end of the pricing window, if you haven’t been priced out, all bushels enrolled will be hedged at the Daily Hedge Price.
Answer: Your worst case hedge price is the Price Out Level. Achieving this price on ALL bushels enrolled would require the market to break below the Price Out Level on day 1. Otherwise, you will accumulate at least some bushels at the Daily Hedge Price.

EXAMPLE #1- DECEMBER 2015 CORN FUTURES

This is a real example in the current market. This is an example of a market that didn’t Price Out.

Current Futures Price $4.20      Product Cost $0.00      Percentage Priced per Day 0.50%      Daily Hedge Price $4.60      Floor Price: $4.00      Price Out Level $3.70

 

Below is an example of a market that goes below Price-Out Level.