Arkansas Cooperative Extension Service Commodity futures contracts can be used by producers to price old or new crop production. A commodity futures contract is a legal agreement between a buyer and seller to exchange a commodity later at a specific price, location, quality, quantity and time. Futures contracts are traded at futures exchanges located in Chicago, New York City, Kansas City and Minneapolis. For Arkansas grain, oilseed and fiber producers, the primary futures contracts of interest are soybeans, rice, wheat and corn traded at the Chicago Board of Trade and cotton futures traded at the New York Cotton Exchange.
Producers can sell commodities in storage or in production using the futures markets.
For example, soybeans can currently be sold using futures for delivery in January, March, May, July, August, September and November of 1998. More distant contracts also are available. Companies and individuals who buy commodities to use as inputs or to export use the futures market to buy for later delivery. These companies need soybeans, rice and cotton throughout the year to process into feed, food or durable goods. The buyers are matched up with sellers of the commodities at the futures markets and prices are determined by the interaction of supply and demand factors in each delivery period.