The Delivery Decision

The first step in making efficient delivery decisions is calculating the delivery value of corn and soybeans. While many of you have programs that routinely calculate the benefit of making or taking delivery, you are welcome to use the CBOT’s online excel spreadsheet, which include links to the information required. We’ve also included an example below.

Under the Illinois Waterway Delivery System, the location differential and load-out charge are added to the futures market price. The market participant then compares this price to the cash price at the delivery point (shipping station). The cash price is probably most easily calculated by subtracting the barge freight from the New Orleans, LA (NOLA) cash price. This process allows market participants to compare cash and futures prices to make delivery decisions.

Soybeans Example: On August 10, CBOT August soybean futures closed at $5.50 1/4/bushel. As a futures market participant, you want to compare the $5.50 1/4/bushel price with the cash price of c.i.f. New Orleans (NOLA) soybeans, which is $5.82 1/2/bushel.

Localizing the August futures price to a delivery location:

August soybean futures price $5.50 1/4/bu (from CBOT site)
+location differential +$0.03/bu (See location differential table)
+FOB charge specified in futures contract +$0.04/bu
FOB shipping station (futures delivery) $5.57 1/4/bu FOB Peoria shipping station

Backing off the New Orleans cash price to FOB Peoria shipping station value:

NOLA cash price $5.82 1/2/bu (from USDA Market News)
-barge freight from shipping station
to NOLA for Peoria, IL -$.26/bu (180% of benchmark tariff x 481¢/ton x .03)
FOB shipping station (cash market) $5.56 1/2/bu FOB Peoria shipping station

Note that when converting the barge freight cost of soybeans from cents/ton to cents/bu, a standard conversion factor of .03 is used. For corn, that conversion factor is .028.