Farm & Ranch Living - - THE WAY WE LIVE -

Buy­ers and sell­ers get to­gether (elec­tron­i­cally) at a cen­tral­ized mar­ket­place, such as the Chicago Board of Trade. In­stead of trad­ing ac­tual grains—like corn, soy­beans, oats or wheat—in­di­vid­u­als and com­pa­nies lock in fu­tures con­tracts. Such a con­tract is a bind­ing agree­ment to buy or sell a spe­cific quan­tity of grain in the fu­ture at an agreed-upon price (usu­ally higher than the cur­rent price, Mark Mueller says). The place of de­liv­ery is also de­tailed in the con­tract. But the con­tract comes with some risk to the farm­ers, who are ob­li­gated to pay in­vestors a mar­ket-based pre­mium for any quan­tity of grain they can’t de­liver due to crop fail­ure.

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