Min/Max Contract

Min/Max Contract Examples:

’25 Wheat: 

• 6.00 Min/7.50 Max 0.33 Investment  

’25 Soybeans: 

• 10.60 Min/12.60 Max 0.50 Investment  

’25 Corn/Milo: 

• 4.60 Min/5.60 Max 0.25 Investment  

Advantages and Disadvantages: 

Min/Max contracts give the producer a floor in the market and provide an opportunity for a better price if the market goes higher. The big advantage is being able to protect a price if the market goes lower while still being able to participate in a market that goes higher. If the market provides an opportunity, an advantage is we can remove the ceiling or move the floor to a more desired position. The disadvantages of a min/max contract include limited upside due to the ceiling price, the required investment, and the restriction on selling grain against the position when the ceiling is in effect.

Overall Thoughts:  

Min/Max strategies work well in volatile markets, which we are experiencing right now. If the market moves away from the floor price, there are things we can do to manage the position. These contracts are fully customizable, allowing you to set a higher price ceiling at a higher cost, or a lower price ceiling at a reduced cost. For example, instead of doing a 4.60/5.60 Min/Max for 0.25 on corn, we could do a 4.60/6.00 Min/Max for 0.30 or a 4.60/5.10 Min/Max for 0.15.
 

If you have any questions or want to learn more about Min/Max contracts, please contact Evan Rosenow at (620)747-0329, or reach out to your Producer Ag Grain Marketing Specialist.

Article provided by Evan Rosenow, Grain Marketing Specialist