On the other hand, if the output quality is highly variable, then simply paying based on the output characteristics may be the most effective approach. A harvest delivery requires delivery of the crop at harvest. A buyer's call delivery requires delivery of the crop during a window of time specified in the contract. This window typically begins at the end of the harvest season and may be months in length. Very short time periods for delivery can cause logistical problems for producers.
Most production contracts leave the base price risk in the hands of the contractee.
Assume a contractee has signed a contract to deliver 5,000 bushels of high oil corn to a local elevator. The contract will typically state that the premium will be paid on a per bushel basis determined by the level of oil content in the corn. For the harvest delivery option, the contractee has a good idea of the time period in which the corn will be turned over to the contractor so traditional risk management strategies apply. Other Considerations Specialty crops must be segregated. The producer may end up storing 5,000 bushels of specialty corn in a 10,000-bushel bin where 10,000 bushels of conventional grade corn could have been stored.