FORWARD CONTRACTING IN THE CORN BELT AND SPRING WHEAT AREAS, 1988: RESULTS OF AN ELEVATOR SURVEY

Although drought-induced forward contracting problems have affected many elevators in 1988, few elevators face serious losses. Elevators surveyed in 13 Corn Belt and spring wheat States in September expected that farmers would default on less than 1 percent of their contracts. Only about 1 percent of these elevators expected that losses from farmers failing to meet contract commitments would exceed 10 percent of the elevator's net worth. Over half of the elevators in these 13 States entered forward contracts with farmers for corn, soybeans, or wheat produced in 1988. These contracts covered approximately 15 percent of the corn, 22 percent of the soybeans, and 7 percent of the spring wheat purchased by these elevators during the year. Because farmers seldom contract for more than half of their expected production, contracting problems have occurred mainly where yield shortfalls are most extreme. Elevators have renegotiated or expect to renegotiate less than 2 percent of their contracts. Of those contracts that are renegotiated, approximately 90 percent are expected to be settled by the farmer paying the elevator the full difference between the current price and the contracted price, plus a service charge.


Issue Date:
1988-12
Publication Type:
Report
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/278141
Language:
English
Total Pages:
29
Series Statement:
AGES881102




 Record created 2018-10-12, last modified 2020-10-28

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