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

What is Price Builder Bonus?

The Price Builder Bonus Contract provides the ability to market bushels every day of the contract period at a floor price level above the futures level that exists at the time the contract is created. Bushels will “build” 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.

This product helps level out price risk with alternative cash contracts that simplify both decision-making and execution. Price Builder Bonus Contracts price themselves over a specific period of time and are simply initiated by signing up current bushels.

Price Builder Bonus—Example
Current November Futures (SX15) $9.72
Price Builder Floor Price $10.38
Target Price $10.38
Knockout Price $8.97
Pricing Period Feb 2 – Oct 21 (183 Trading Days)
Cost $.02 (Service Charge)
   
Potential Results

Scenario 1
The market stays above the knockout price of $8.97 for the entire pricing period (183 days), but closes below $10.38. All bushels initially contracted will price at $10.38, and a HTA contract or the pricing of a basis contract will occur at $10.38. No additional bushel obligation is incurred.

Scenario 2
The market stays above the knockout price of $8.97 for the entire period, but closes above $10.38. All bushels will be priced at $10.38, and a HTA contract or the pricing of a basis contract will occur at $10.38. In addition, an equal number of bushels will also be priced at $10.38 (the obligation is doubled). The additional bushels become a new HTA contract or can be used to price a previously established basis fixed contract.

Scenario 3
The market touches $10.38 per bushel on June 8, 91 days into the 183 day contact or 50 percent of the period. Therefore, 50 percent of the bushels contracted will be priced at $10.38. The un-priced balance will be available to price as the producer sees fit after the knockout has occurred.

Contact us for more details:
Anna Kaverman at (419) 769-5403

For questions or comments, contact webmaster@mercerlandmark.com.