“I always work with my marketing service to determine a break-even price for my crops, then put together a marketing plan,” says Scheckel. “Those early prices looked good at the time and I honored them.”

He notes that the ethanol plant works with growers who cannot deliver the corn due to weather-hampered production. “In some cases they'll charge a small fee, about 10¢/bu., and let you roll your contracts over to the next year.” he says. “That's something you look for in a contract.”

Gail Ortegren, grain manager for Cooperative Producers, Inc., Hastings, NE, says growers are already contracting to deliver corn as far out as 2010. “I've never seen it that far out before,” he says. Ortegren and his associates in the central Nebraska co-op are making sure contracts are signed, sealed and delivered.

“The biggest thing on all contracts, no matter what kind, is to make sure growers understand all of the terms and ‘what ifs’ of the contract,” he says.

“Some of the exotic contracts are more complicated. Simpler contracts, whether they are ‘futures’ only or normal cash contracts, are pretty straightforward,” Ortegren says. “But growers still have to know all of the terms of the contracts and fill out all required papers.”

Elevators have done a better job to make contracts more enforceable, he says, “and growers have obviously become more educated or they wouldn't be looking for these types of exotic contracts.”

Good encourages growers to “pay close attention to the provisions of the contract that would speak to what conditions they can buy-out and at what cost.

“For the most part, we've always viewed these as a hard contract; date, quantity and price all locked in. But look for any other conditions that would affect the obligation to deliver, whether it's a specific provision that links to what happens with a crop failure or other situation,” Good says.

Klemme says honoring a contract “goes back to the credibility and ethics of the industry. Some areas may consider the farmer a merchant, where he is obliged to perform on an oral agreement, which may even hold up in court,” she says.

“But you don't want to have to go to court. If you're a grower, honor your agreements and sign your contracts. Get contracts signed if you are the elevator manager. And make sure they are kept in a fireproof safe,” Klemme says.

“Whether you're the farmer or the elevator operator, you should accept that in this time of high prices, not all things will turn out the way you want,” she says.

Grain Contract Checklist

The Michigan Farm Bureau, working with the Missouri Farm Bureau, has developed a checklist for grain production contracts, including how they differ from marketing contracts, says Bob Boehm, manager of its commodities and marketing department.

The checklist, accessible at www.michiganfarmbureau.com/specials/grain_contracts.php, provides virtually any detail a grower should know about what a contract should contain before being signed.

In addition, Boehm says Michigan Farm Bureau has helped develop the Farm Produce Insurance Authority, which oversees the state's Farm Produce Insurance Act. “It established a program in which producers of dry beans, grains or corn could contribute a percentage of their proceeds (up to 0.2%) to a new fund and could recover from the fund for losses caused by a grain dealer's financial failure,” he says.

The fund provides for reimbursement to a participating producer for losses suffered when a licensed grain dealer has declared insolvency or was otherwise unable to pay its claimants. For more information, go to www.michigan.gov/graindealers, then under Farm Produce Insurance. Also, check with your local Farm Bureau or Department of Agriculture to determine if a similar program is available in your state, says Boehm.