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| CHI
Compass® Contracts are innovative new
contracts that rely on newly introduced OTC
derivatives. Some contracts provide market
protection using averaging techniques, while
others more closely resemble exchange traded
options with non-traditional expiration dates.
All of our contracts can be used in a comprehensive
marketing plan to more effectively manage
price risk. |
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| Averaging
Contracts |
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Floored
Average™ Contracts
Floored Average™ contracts combine the
wisdom of pricing bushels on a daily basis
with the protection of a floor price to give
the producer a powerful marketing tool. These
contracts guarantee a floor price for the
futures component of a cash sale. If the average
price of the futures contract is higher than
the floor over the life of the contract period,
the producer gains the higher average. If
the average price is below the floor, the
producer receives the floor. These contracts
cost less than exchange traded puts and calls,
and do not require the producer to make additional
difficult marketing decisions. |
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Example |
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the producers to price grain sold to
the elevator at the higher of a floor
price or the average settlement of a
futures price over a defined period
of time. The cost of these contracts
is typically less than exchange traded
puts. |
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Floor
chosen for Dec. Corn is $2.60
Pricing period is Feb. 15 - July 15
Cost is $.10 |
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| Possible
Outcomes: |
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If
the average Dec Corn futures price between
Feb 15 and July15 is: |
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1.
$2.20 the contract will settle at
$2.50
($2.60
floor less $.10 cost)
2. $2.80 the contract will settle
at $2.70
($2.80 average less $.10 cost)
3. $3.20 the contract will settle
at $3.10
($3.20 average less $.10 cost)
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Target
Range™ Contracts
Target Range contracts are similar to Floored
Average™ contracts in that they provide
a futures settlement at a minimum floor price
but with upside potential if there is a higher
average. This contract has even less cost
than a Floored Average™ contract in
exchange for a ceiling on the average price.
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| Example |
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Target
Range Contracts are Floored Average
contracts with a ceiling to reduce premium.
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Assume: |
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Floor
chosen for Dec. Corn is $2.60
and the ceiling is $2.90
Pricing period is Feb. 15 - July 15
Cost is $.06 |
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Possible
Outcomes: |
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If
the average Dec Corn futures price between
Feb 15 and July15 is: |
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1.
$2.20 the contract will settle at $2.54
($2.60 floor less $.06 cost)
2. $2.80 the contract will settle at
$2.74
($2.80 average less $.06 cost)
3. $3.20 the contract will settle at
$2.84
($2.90 ceiling less $.06 cost)
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Capped
Average™ Contracts
A Capped Average™ contract works similar
to a Floored Average™ contract. However,
instead of providing a producer the protection
of a price floor, the Capped Average™
provides an end user the protection of a price
ceiling with the potential of a settlement
at a lower average futures price.
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| Example |
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Allow
the elevator to offer customers the
ability to price futures at the lower
of a ceiling price or the average future
price over a defined period. |
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Assume: |
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Ceiling
chosen for Dec. Corn is $2.50
Pricing period is Feb. 15 - July 15
Cost is $.10 |
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Possible
Outcomes: |
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If
the average Dec Corn futures price between
Feb 15 and July15 is: |
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1.
$2.20 the contract will settle at $2.10
($2.20 average less $.10 cost)
2. $2.80 the contract will settle at
$2.40
($2.50 ceiling less $.10 cost)
3. $3.10 the contract will settle at
$2.40
($2.50 ceiling less $.10 cost)
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| Builder
Contracts |
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Price
Builder Contracts
Our Price Builder Contract allows you to market
bushels every day of the contract period at
a floor price level above the futures level
that existed at the time of contract creation.
Bushels at that floor price “build”
each day until either the contract period
expires, or a “knock-out” price
below the market is hit. This is a great contract
in marketplaces that appear to be stable,
with not much price movement expected in the
future. |
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Price
Builder Bonus Contracts
Our Price Builder contract allows
you to market bushels every day of the contract
period at a floor price level above the futures
level that existed at the time of contract
creation. Bushels at that floor price “build”
each day until either the contract period
expires, or a “knock-out” price
below the market is hit. This is a great contract
in marketplaces that appear to be stable,
with not much price movement expected in the
future.
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| Premium
Contracts |
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Cash
Plus Contracts
Cash Plus contracts provide the producer a
premium or a “push” in the price
of his old crop grain in exchange for a firm
offer on an equivalent number of bushels of
new crop grain at a specific strike price.
This is a great way to enhance your old crop
bushels while making an offer of new crop
bushels at levels beneficial to your new crop
marketing plan.
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| Example |
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Cash
Plus Contracts pay producers to push
on old crop bushels in return for a
firm offer for new crop, at a specified
price. |
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Assume: |
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Old
crop corn bid is $2.50
Old crop premium is $.08 for an offer
of a new crop futures fixed contract
at $2.90.
Expiration July 15
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(Note:
There are many expiration dates with
different premiums attached) |
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Possible
Outcomes: |
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A
producer receives "Cash" price
of $2.50 plus a "Premium"
of $.08 for a total price of $2.58,
for old crop bushels. |
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If
Dec. Corn, on close July 15 is: |
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1.
Above $2.90, the producer will have
a futures fixed contract for new crop
corn at $2.90
2. Below $2.90, no contract is created.
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CHI
Health Fund Plus™ (New!)
CHI Health Fund Plus™ is an innovative
new program in which a premium is paid into
a producer’s Health Savings Account
in exchange for a grain commitment of new
crop grain at a specific strike price.
Click here
for more information! |
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