The Delivery Process - Corn

If a firm decides to make or take delivery against a futures position, the following procedure takes place to exchange a futures position for a shipping certificate. The delivery process extends over three business days. This cycle is repeated for each delivery day in the delivery month, until the last delivery day.

Day 1: Intention Day/Position Day

Position day occurs two business days prior to delivery day. Price limits are removed on first position day.

The holder of a short futures position (the short) initiates delivery by notifying the Board of Trade Clearing Corporation before 4 p.m. (2:00 p.m. on LND) that he or she wants to make delivery. Holders of long futures positions (the longs) report eligibility to receive delivery by 8:00 p.m. Longs are ranked according to the amount of time they have held the long futures position (oldest is ranked first).

Day 2: Notice Day

Notice day occurs one business day prior to delivery day. The oldest long position holder is notified by 7 a.m. by the Clearing Corporation that delivery will take place. The short invoices the long by 4 p.m. Invoice shows applicable quantity, grade and differential, location and differential, storage premium, FOB premium ($.04/bu).

Day 3: Delivery Day

First delivery day is the first business day of the delivery month. Last delivery day for corn and soybeans occurs two business days after the last trading day of the delivery month.

The short delivers the shipping certificate to the long. The long makes payment by 1 p.m. (or 9:30 a.m. the next banking day if it is a bank holiday).

Last Trading Day

Last trading day occurs one business day prior to the 15th calendar day of the delivery month. All open contracts are settled by delivery on the second business day following LTD or liquidated by EFP the business day following LTD.

Shipping certificates are created by shippers approved by the Chicago Board of Trade. If a firm acquires a shipping certificate through the futures delivery process (i.e., takes delivery of shipping certificate), the firm can:

  1. Hold onto the certificate. In this situation, the owner pays the premium charge to the issuer of the certificate. For corn and soybean contracts the rates are $.0015/bu/day for shipping certificates issued on the Illinois River and in St. Louis; $.0012/bu/day for Chicago and Burns Harbor shipping certificates.
  2. Sell the shipping certificate to someone else at a negotiated price.
  3. Re-deliver the shipping certificate by selling a futures contract and initiating delivery of the shipping certificate to a new owner.
  4. Request load-out.

Requesting Load-Out

Load-out begins three business days after Delivery Day, and continues for a maximum of 30 days. If a shipping certificate owner requests load-out, he or she surrenders the certificate to the Chicago Board of Trade Registrar’s Office and provides the issuer with shipping instructions. Load-out then commences according to the CBOT Loading and Shipping Regulations. Final settlement charges are based on official weights and grades.