Forward pricing calculator for farms

Is locking the price now worth it, and what does the basis charge you?

Two sides of one decision: the price you lock against the average of waiting, and what the contract charges inside the basis.

Currency

Fill in the forward price and one more field. The expected price lights up the comparison; futures lights up the basis.

Forward price offered todayThe price per unit the buyer guarantees now for delivery later. Example: 120 per tonne.

Cash price you expect at deliveryWhat you think a unit will be worth on delivery day if you lock nothing. Example: 127.

Cost of waiting until deliveryPer unit, and only what the contract does not cover: interest on the money tied up, storage, shrink. Example: 6.

How far the price could move, up or downPer unit, around what you expect. If 113 and 141 would not surprise you, the deviation is 14.

The contract basis (optional)

Delivery-month futures, todayToday’s exchange quote for the contract month that covers your delivery. Example: 131.

Basis you expect at deliveryCash price minus futures, at your local market. It is usually negative; write the sign. Example: −6.

The math runs in your browser. We do not send or store anything you type.

Your comparison

Enter the forward price and one more field to see the comparison. The expected price gives you the difference; futures gives you the basis the contract embeds.

Take the full report

The step-by-step calculation with your own numbers, both sides of the comparison with the range drawn out, the basis the contract embeds and what it charges, the scenarios of delivery price and cost of waiting, and the sources, in a report designed to keep and take to the conversation with the buyer.

ArticleWhat the forward price charges inside itWhy the bid already has the service charged inside the basis, why the average of waiting does not decide on its own, and what to do with each result. With a worked example and sources.Read the full article

Forward pricing report

Your inputs

Your comparison

Calculation trail

What these numbers say

They are two readings of one decision. The first compares the guaranteed price with the average of waiting, and the gap between them is what certainty costs. The second pulls out of the offered price the basis it embeds, and compares it with the basis you expect: that difference is what the buyer charges for taking your risk, and it appears on no line of the contract. The two do not add up, because they use different expectations of the same price.

Understand the method in full

The full article shows why the bid already carries the service charged inside the basis, why the average of waiting does not decide on its own, and what to do with each result.

Read the full article

How to read it

The waiting side is an average, not a promise: it comes from an expectation you typed, which is why it carries a range around it. The locking side is a guaranteed price, but it does not cover freight, drying, grading, or the obligation to deliver the tonnage. The two readings, the difference and the basis, are two cuts of one decision and do not add up.

The sources

A buyer calls with a price good until the end of the day. Put both sides on one screen: the guaranteed price on one, the average of waiting with its range on the other, and the basis the offer embeds underneath. The math runs in your browser, and nothing you type leaves it.

A merchant’s forward bid carries a fee no line names, and Kansas State University put a figure on it for Kansas wheat: from bids collected weekly at eighteen elevators, the cost of forward contracting ran about 0.086 a bushel in 2002 to 2007 and 0.327 in 2008 to 2012, once local basis turned volatile.

The tool reads that fee before the price, because the charge sits inside the bid rather than beside it, working the two subtractions the agmanager guide to forward contracts lays out. It answers whether locking now is worth its cost, not whether the price will rise, which stays the reader’s own call.