Grain Pricing Order

A Grain Pricing Order (GPO) is an order to sell a specified amount of grain if the market reaches a desired price level within a given time period. You can use a GPO to create a Deferred Delivery contract (futures +/- basis), or to apply a futures price to a Fixed Basis contract (futures only). You can also use a GPO for unpriced grain, unharvested grain or grain that is not yet grown.

A GPO is most beneficial when the futures market is volatile. GPOs require you to establish the grain quantity, grade, delivery period, target price and order expiration date. The specified expiration date should be long enough to take advantage of market movement (i.e. two weeks) but short enough to not forget about the commitment (i.e. three months). Provided the GPO is not filled, you can change the target price, though we suggest that you do not change the price more than once or twice during the pricing period (if you continually move the target price above the market there is a chance the order will not get filled).

Benefits: GPOs instill a sense of discipline into a marketing plan by removing some of the emotion attached to making the pricing decision GPOs save you time by allowing Cargill to monitor the market for the desired price level GPOs are traded regularly throughout the day, allowing you to benefit from market rallies GPOs eliminate the worry associated with missed pricing opportunities if the price reaches an acceptable level GPOs provide flexibility as you can enter into them at any time

Risks: The market may reach the target price but continue to increase after the GPO has been executed The market may not reach the target price The market may reach a level close enough to the predetermined price but decrease prior to the expiration date

 

Disclaimer
This marketing alternative overview has been prepared to help you identify the marketing alternatives offered by Cargill, along with the advantages and disadvantages of each. Cargill has used its best efforts to provide you with this useful and helpful information. However, we cannot guarantee that this contract alternative will function in the same way in each and every situation, and information that may be accurate for one farmer may not necessarily prove to be accurate for another. Therefore, we do not make any warranty or guarantee as to the accuracy of any of the information as it is applied in a particular marketing strategy. Entering into any of the transactions outlined on this site will not result in your opening a futures account with Cargill or otherwise, nor will you obtain a futures position. The only futures position relative to any transaction, if one exists, will be held by Cargill. This and other contracts may employ the futures market as a grain pricing mechanism, but the contracts described are not, themselves, futures contracts.