Grain contracts: spot, forward, pools and minimum price

There are four basic ways to sell a tonne of UK grain: spot, forward, through a pool, or on a minimum price contract. Everything a merchant offers you is one of these, or a blend. None of them is "right" — they just put the price risk in different places, and the sensible question is always which risk you'd rather carry.

Here's each one in plain terms, plus the two things that catch people out year after year: committing tonnes you haven't cut yet, and the claims clauses buried in the spec.

The four contract types

Spot

You sell grain you already have, at today's price, for movement soon — typically within a few weeks. Simple, clean, done. The grain exists, the weight is known, and the only surprise left is the buyer's analysis.

Spot suits grain you want gone (a shed you need back, wet grain you'd rather not dry) and farms that prefer to make lots of small decisions rather than a few big ones. The cost of spot-only selling is that you're always taking whatever the market happens to be on the day you need space or cash.

Forward

You fix a price now for grain moved later — a movement window months ahead, sometimes before the crop is drilled. Forward selling is how you take a price you like when you see it, rather than hoping it's still there in November.

The trade-off is commitment. A forward contract is a firm obligation to deliver those tonnes, in that window, to that spec. Which brings us to the risk nobody prices properly — more on that below.

Pools

You commit tonnes to a merchant or co-op pool, they market the grain across the season on behalf of everyone in it, and you get the averaged result, less their fee. You give up the highs, you avoid the lows, and you stop spending winter evenings second-guessing the futures market.

Pools suit farms that honestly know they won't watch the market, and anyone who's noticed that their own timing over the past five seasons has been worse than an average would have been. Plenty of good businesses run a third of their tonnage through a pool for exactly that reason.

Minimum price

A floor price plus the ability to benefit if the market rises — usually built with options, and it costs a premium, in the same way insurance does. If the market falls, you get the floor. If it rises, you get most of the rise, less what you paid for the protection.

These suit seasons when you need certainty (a big machinery payment due, a rent review) but don't want to lock out a rising market. The premium is a real cost — as a rough guide, several pounds a tonne — so it's cover you buy deliberately, not a free lunch.

Contract	Price risk	Suits
Spot	You carry it until sale day	Grain in the shed, quick decisions
Forward	Fixed — but you must deliver	Locking a price you like
Pool	Averaged across the season	Farms that won't watch the market
Minimum price	Floor plus upside, for a premium	Certainty without locking out a rise

The risk nobody prices: tonnes you haven't cut

Sell 400t of wheat forward in May at a price you're pleased with. Harvest comes in light — drought, a rough second wheat block — and you cut 360t. You still owe 400t.

The usual outcome is a buy-back: the merchant closes out the missing 40t at the market price on the day, and you pay (or occasionally pocket) the difference. If the market has risen £30/t since you sold — and short crops and rising markets tend to arrive together — that's a £1,200 cheque for grain you never grew. On a bigger shortfall in a sharply higher market, buy-backs run into five figures.

The defence is boring: don't forward-sell more than a conservative share of your realistic crop — many farms cap it around 50–60% of a cautious pre-harvest estimate — and update the sums as harvest firms up the real number.

Specs and claims: where the deductions live

Most UK grain trades on AIC contract terms, and the spec clauses are where money quietly leaks. A typical feed wheat spec is a maximum of 15% moisture, a minimum specific weight of 72.5 kg/hl, and a maximum of 2% admixture — but check your own contract, because buyers vary.

Grain outside the spec doesn't usually bounce; it gets claimed. The buyer deducts per the contract scale — so much per point of moisture over, so much per kg/hl of specific weight under. Individually the claims look small. Across a season of borderline loads they add up to a worse achieved price than the headline you thought you'd sold at, which is one reason your intake results are worth reconciling against your own shed and drying records.

Keep a contract register

The failure mode at harvest isn't usually a bad contract — it's nobody being sure what's been delivered against which one. Grain goes to the wrong buyer, a movement window slips past unnoticed, or the last three loads of a contract get sold spot by accident.

A contract register fixes it, and it only needs five columns: buyer, tonnes sold, price, movement window, and tonnes delivered so far. Update it every time a lorry leaves. Whether that's a page in the diary, a spreadsheet, or software that builds it from weighbridge tickets matters far less than it existing at all. (Harvestt tracks loads against contracts for exactly this reason, but the principle stands whatever you use.)

Average your achieved price

At season end, add up what every tonne actually fetched — spot loads, forwards, the pool payment, minus claims and buy-backs — and divide by the tonnes sold. That's your achieved price, and it's the only fair way to judge your marketing.

It's usually humbling. The forward sale you were proud of and the spot load you regretted mostly wash out to something near the season average, which is a genuinely useful thing to know before deciding how to sell next year's crop.

Frequently Asked Questions

What is a forward contract for grain?

A forward contract fixes a price now for grain you'll move later, in an agreed movement window — sometimes months ahead, sometimes before the crop is even drilled. It's a firm commitment to deliver those tonnes to that spec. If your harvest comes up short, you'll usually have to buy back the shortfall at the market price on the day.

Are grain pools a good idea?

Pools suit farms that know they won't actively watch the market. The merchant sells across the season and you receive the averaged result less a fee — you give up the peaks and avoid the troughs. Many farms pool part of their tonnage and market the rest themselves, which spreads the decision risk.

How much of my crop should I sell forward?

A common rule of thumb is no more than 50–60% of a cautious yield estimate before harvest, increasing only as the crop firms up. Selling more than you cut means buying back the difference at whatever the market says, and short crops usually coincide with rising prices.

What happens if my grain fails the contract spec?

Under standard AIC terms, moderately out-of-spec grain is usually claimed rather than rejected — the buyer deducts an agreed amount per point of moisture, specific weight or admixture outside the limits. Badly out-of-spec or contaminated loads can be rejected outright. Check the claims scale in your own contract before harvest, not after.

What should a farm contract register include?

Buyer, tonnes sold, price, movement window, and tonnes delivered against each contract so far. Updated per load, it prevents the classic harvest mistakes: missing a movement window, delivering to the wrong contract, or double-selling grain you've already committed.