Sterling Terrell

smart ideas from books (mostly)

  • Home
  • About
    • My CV
    • Books
    • Series
  • Newsletter
  • Advertising
  • Tools
You are here: Home / Potpourri / Cotton Marketing Strategy #2: Forward Contracting

Cotton Marketing Strategy #2: Forward Contracting

Cotton Marketing Strategy #2: Forward Contracting

[This is part of the series: 5 Ways To Market Your Cotton]

As a cotton grower, the second way in which you can market your cotton is with the forward contract.

Unlike the cash sale that is done at the very end of the cotton marketing process, forward contracting is typically done at the beginning.

Often, cotton gets forward contracted before it is even planted.

For example, say prices are up and you want to lock in the good price by selling your crop – however, your crop is not ready for a cash sale.

In this case, you can go to a cotton buyer and forward contract your crop with one of two types of contracts.

1. An Acre Contract – obligates you to produce and deliver all of the ginned cotton produced on a given number of acres.

2. A Bale Contract – obligates you to produce and deliver a fixed number of ginned cotton bales.

Obviously, both acre and bale contracts are made with pre-set discounts for quality.

The risk of a forward acre contract is that you might not hedge all your acres, prices can also change after the hedge, and there is the possibility of buyer default.

The risk of a forward bale contract is that you might not produce enough bales to deliver on your contract. You can also produce too many bales and then the over-production is not hedged. Prices can change after the hedge, and there is also the possibility of buyer default.

Share this:

  • Click to share on Facebook (Opens in new window)
  • Click to share on Twitter (Opens in new window)
  • Click to share on Pinterest (Opens in new window)
  • Click to share on Tumblr (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Reddit (Opens in new window)
  • Click to share on Pocket (Opens in new window)
  • Click to share on WhatsApp (Opens in new window)

Related

Filed Under: PotpourriTagged With: #Cotton, #CottonMarketing

Privacy & Cookies: This site uses cookies. By continuing to use this website, you agree to their use.
To find out more, including how to control cookies, see here: Privacy Policy

Subscribe to Blog via Email

Notifications of all new posts by email.

Connect

  • Facebook
  • LinkedIn
  • Pinterest
  • Twitter

Search

Top Posts

  • The Tricky Lily Pad Riddle (You Probably Can't Solve)
    The Tricky Lily Pad Riddle (You Probably Can't Solve)
  • Why Illegal Drugs Are A Monopsony
    Why Illegal Drugs Are A Monopsony
  • Hyatt Hill Country Sunday House
    Hyatt Hill Country Sunday House
  • Oblique Humor Is Better Than Anonymity
    Oblique Humor Is Better Than Anonymity
  • Instabooks 169
    Instabooks 169
  • Track And Hook Songwriting
    Track And Hook Songwriting
  • The Tragedy Of Gina "Bronco" Bouza (1932-1957)
    The Tragedy Of Gina "Bronco" Bouza (1932-1957)
  • Wonder Park Pi Song (Watch It Stick In Your Head)
    Wonder Park Pi Song (Watch It Stick In Your Head)
  • 8 Great Passages From: The Hiding Place, By: Corrie Ten Boom
    8 Great Passages From: The Hiding Place, By: Corrie Ten Boom
  • Competition Cheer
    Competition Cheer

Supporting = Loving

Buy Me a Coffee

Copyright © 2023 · Generate Pro On Genesis Framework · WordPress · Log in