Forward Cash Contracts, Explained
A forward contract locks a cash price today for grain you'll deliver later — futures and basis fixed in one handshake. Here's what you're actually locking, and the delivery risk to respect.
What a forward contract is
A forward cash contract is the workhorse of grain marketing: you agree with a buyer today on a price, quantity, and delivery window for grain you'll deliver later — often months later, often before it's even planted. "5,000 bushels of corn, October delivery, $4.60" is a forward contract.
A cash price is always two parts — futures plus basis — and a forward contract locks both at once. That's its power and its limitation: one decision, both components, no take-backs if either one improves afterward.
What you're protected from (and not)
Protected: any fall in futures or weakening of basis between signing and delivery. The price is the price.
Not protected:
- Production risk. You've promised bushels you haven't grown. If a drought takes the crop, you still owe the bushels — or the money to buy out of the contract, typically at whatever the market's done since. The classic discipline is to forward-sell only up to a comfortable share of your insured guarantee (your APH times coverage level), scaling up as the crop makes itself.
- Upside. If the market rallies past your price, that margin belongs to the buyer's side of the ledger. That's not a flaw; it's the trade you made. A locked profit is not a mistake.
Where it fits among the alternatives
- Want to lock only the futures side and float basis → hedge with futures/HTA (see hedge-to-arrive).
- Want to lock only the basis side and float futures → basis contract.
- Want both locked, no margin calls, no brokerage account → forward contract. Simplicity is a legitimate feature.
The disciplined version of forward contracting isn't a prediction — it's selling increments when price covers cost of production plus a margin you'd sign for again.
Keep reading
- Glossary · 1 min read
Basis Contracts, Explained
A basis contract locks your local basis while leaving the futures side open. It's the tool for 'basis is strong, board is weak' — here's how it works and when it earns its keep.
Read - Glossary · 1 min read
Grain Basis, Explained
Basis is the difference between your local cash price and the futures board — the local half of every grain-marketing decision. Here's what it means and why it moves.
Read - Marketing · 5 min read
Farm Marketing AI: How an AI Advisor Changes the Grain-Marketing Workflow
Grain marketing is where a year's profit is made or lost — and the task farmers most often run out of time for. Here's how an AI farm advisor rebuilds the marketing workflow around your operation, step by step.
Read