- Parent Category: Negotiation
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A futures contract is a commitment to make or take delivery of a specific quantity and quality of a given commodity at a specific delivery location and time in the future. All terms of the contract are standardized except for the price, which is discovered via the supply (offers) and the demand (bids). This price discovery process occurs through an exchange’s electronic trading system or by open auction on the trading floor of a regulated commodity exchange.
CBOT Corn, Wheat, Soya, Soya Oil, Soya meal
All contracts are ultimately settled either through liquidation by an offsetting transaction (a purchase after an initial sale or a sale after an initial purchase) or by delivery of the actual physical commodity.
An offsetting transaction is the more frequently used method to settle a futures contract. Delivery usually occurs in less than 2 percent of all agricultural contracts traded.