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Mercer Landmark, Inc.
Mercer Landmark :: Grain :: Price Builder Bonus

What is Price Builder Bonus?

The Price Builder Bonus or accumulator contract provides the ability to market bushels every day of the contract period at a floor price level above the current futures level. Bushels will “accumulate” each day until either the contract period expires or a “knockout” price below the market is hit. Under the Price Builder Bonus contract, if the futures price at expiration is at or above the target price, the quantity of bushels obligated is doubled. The advantages of this contract include the ability to sell bushels above current futures values and the ability to contract any quantity of bushels; no minimum of bushels is required.

Price Builder Bonus—Example
Current November 18 Futures: (SX18) $9.51 ¼
Floor Price Level (accumulator): $10.00 ($.48 ¾ premium above current mkt)
Knockout Price: $8.98
Pricing Period: August 28, 2017 – October 17, 2018 (288 business days)
Committed Bushels: 5,000
Cost: 2 cent service fee which will be deducted from final futures pricing.
   
Potential Results

Scenario 1: No additional obligation
The market stays above the knockout price of $8.98 for the entire pricing period (288 days), but closes below $10.00 on October 17, 2018. All bushels initially contracted will be price at $10.00. A futures contract or the pricing of a basis contract will occur at $10.00. Only 5,000 bushels will be owed. No additional bushel obligation is incurred.

Scenario 2: Double Up
The market stays above the knockout price of $8.98 for the entire period, but closes above $10.00 on October 17th, the day the contract expires. All 5,000 bushels initially committed will be priced at $10.00. In addition another contract for the same bushel amount of 5,000 bu. will occur at $10.00. Total of 10,000 bu. at $10.00 will be owed.

Scenario 3: Knock Out
The market touches $8.98 per bushel 144 days into the 288-day contact or 50 percent of the period. Therefore, 50 percent or 2,500 bushels contracted will be priced at $10.00. The 2,500 bushel unpriced balance will be available to price as you see fit after the knockout has occurred.

Contact us for more details:

Anna Kaverman
Grain Originator
(419) 769-5403

Angie Bohman
Grain Originator
(567) 644-4605
Jerry Meyer
Grain Originator
(937) 441-0924
Jackie Sheridan
Grain Originator
(419) 852-8233



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