An introduction to grain contracts
A well-designed contract will pave the way for a smooth transfer of goods (grain) from the seller to the buyer, with the expected price paid in return. These pages outline what to consider – before and after any contract is drafted.
What is a grain contract?
A contract is a legally binding promise – here, between a seller and buyer of grain. The grain contract comprises the key terms and conditions relating to the agreement. These include the expected price, quality, variety, quantity, delivery period, payment terms and any special conditions.
What to consider before the contract stage
- Know and grow for your market – be clear on what you intend to sell and deliver (e.g. select appropriate varieties)
- Assess ability to segregate and store different varieties/qualities
- Check the latest assurance scheme requirements, which now cover the majority of crop sales
- Manage price volatility – consider all the options and have a flexible marketing plan
- Develop a long-term business strategy to make it cost-competitive and resilient
Agreeing the contract terms and conditions
It is essential to know what contract is being used and that it is based on clear terms and conditions. Before agreeing the contract, negotiate, establish and accept all terms and conditions. There are many differences between the requirements of cereals markets and oilseeds markets – and contracts reflect this variation.
Grain sampling and storage
For both cereals and oilseeds, understanding the quality and condition of grain is crucial. Accurate sampling at each stage of the grain chain is required to develop that understanding. This, alongside good grain storage, should help to reduce waste and minimise charges, claims and rejections.
Make sure you understand your contractual obligations and rights, including those associated with grain sampling.
Always retain samples until payment has been received.