Trading and Risk Management Terminology
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Risk Terminology

Description

A

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Absorption The assumption by one carrier of switching or other special charges of another carrier without increasing the freight charges.
Accessorial Services Activity performed by a railroad which is in addition to the Transportation Service. Usually includes switching, transit, or holding cars for billing. Additional charges are typically involved.
Acreage Allotment The limitation on planted acreage established by the government for each farmer for some basic crops.
Acreage Reserve A part of the farm program which applies to basic commodities under which the farmer receives payment from the government for not planting part or all of his acreage allotment.
Actual Placement The actual time a car is placed at a facility.
Additive Stress Forward looking and subjective estimate of market loss potential; excludes offsets and is additive in nature.
Aeration Movement of outside air through grain, one of the most effective methods of conditioning grain. System usually consists of a fan to move air and ducting to control air movement.
Affidavit Weights Unofficial weights obtained by a Weigher using scales without supervision and documented by an affidavit weight certificate (Certificate must have scat numbers, date, scale test information, tare, net and gross weights). In-house weights.
Afloat Grain which is loaded in barges or vessels, in harbor or in transit, but which has not reached its destination and been unloaded.
Agency Tariff A tariff published by a publishing agent for one or more transportation companies, as opposed to an individual tariff, which is published by an individual transportation company for itself and other.
AMA Agricultural Marketing Act.
Ambient Temperature Temperature of the atmosphere surrounding the grain.
Appeal A call to re-sample when it is believed the original sample misrepresents the grain in question. An appeal grade is likely to change only the factor believed to be in error.
Arbitrage Simultaneous purchase of cash commodities or futures in one market against the sale of cash commodities or futures in the same or a different market in order to profit from a discrepancy in prices. Also includes some aspects of hedging. See Spreads.
At-the-Money Option An option that is purchased at the current trading futures value or the value closest to the market price.

B

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Backhaul The empty return trip of a grain hauling truck/rail/barge.
Backwardation Also known as an Inverse; a condition in which spot prices and/or nearby futures prices exceed deferred prices. See Contango.
Example:
Wheat price for May is 5.3$/bu and the Sept Wheat price is 5.01$/bu.
Ballast Sea water carried in dedicated spaces aboard the vessel when no cargo is carried.
Ballasting The act of pumping the water into the ballast tanks. Also, used to describe a vessel steaming from its last disc discharging port to its next loading area. A “non-revenue” voyage.
BAR Board of Appeals and Review.
Barge A flat bottomed vessel used for transporting grain, coal or other bulk type freight on inland waterways. Usually purchased in groups by tugboats.
Barge Tariff A set barge freight rate (established by the St. Louis Merchants Exchange) from specific points along the River System to New Orleans, Louisiana. Freight is then traded at a percentage over/under this Ievel. For example, St. Louis’ tariff is $3.99/ST. If a wheat barge is quoted at 150% of tariff it will cost 18 cents/bu to move the grain from SX to NOLA.
Basis The difference between a cash price at a specific location and the price of a particular futures contract; could either be added onto the futures price or deducted from the futures price.
Basis Risk Basis is the difference between the spot price of a commodity and the nearby futures price for the same commodity. While spot and futures markets should converge as a result of delivery arbitrage, basis levels can diverge prior to settlement due to constraints in the physical markets (supply, storage, etc.) An extension of basis risk can be used to describe the market risk that results from an imperfect relationship between an underlying exposure and the hedge. In this case, basis risk can also be used to describe pricing differences across different, but related products or to express price spreads within the same product at different locations or quality grades.
Basis Risk Examples:
Spot Chicago corn hedged with nearby CBOT Corn futures represents basis risk in the purest form. Using CBOT wheat futures to hedge a barley exposure, represents an extension of basis risk as the two products, barley and wheat are not perfectly correlated. Central Illinois cash corn currently trades a discount of 5cts per bushel to CBOT Corn futures. Over time, this discount has ranged from 5cts to 20cts under the futures contract.
Batch weights A weighing sequence through a bulk weigh scale, with the objective of a continuous flow of grain and a minimum number of interruptions such as weight totals. It typically involves multiple carriers – rail cars - from one shipper. The unloading terminal gains speed and efficiency, but the weight total will not.
BCFM Broken Corn and Foreign Material. A grade factor in corn. BCFM consists mainly of broken pieces of corn, and BCFM increases with handling of corn.
Bear Market A period in which market prices are declining.
Bearish and Bullish When conditions suggest lower prices a bearish situation is said to exist. If higher prices appear warranted, the situation is said to be bullish.
Benchmark Rate The tariff for the origins to the gulf.
Bid A price offered by a prospective buyer or his agent, subject, unless otherwise stated, to immediate acceptance for a specific amount of commodity, The expression of a firm interest in buying at a specified price.
Biffex Baltic Freight exchange in London. Primary vessel freight exchange. Rates are quoted from major ports around the globe (for example Gulf-ARAG, gulf-Japan, etc).
Bill of Lading (BOL) A document by which a transportation company acknowledges receipt of freight and agrees to transport it. It is a contract between a shipper and a carrier for a transportation service.
Bin Storage room for grain, may be flat bottomed or hoppered, constructed of steel, cement or wood.
Bin Board A board with bin layout superimposed upon it, used to record daily changes in stocks of grain in elevator, References grain by lot, grade factors, date and amount.
B/L Bill of Lading.
Blending Mixing together two or more grains of different grade factors to attain a desired product.
Board Appeal Step above Federal Appeal in the appeal process, members of USDA review the inspection and can overrule a Federal Appeal.
Board of Trade (Chicago) A licensed contract commodity exchange located in Chicago, Illinois; affords facilities for both cash and futures trading in grains.
Board Order or Market if Touched (MIT) Order An order to buy or sell when the market reaches a specific point. A board order to buy becomes a market order when the commodity sells (or is offered) at or below the order price. A board order to sell becomes a market order when the commodity sells (or is bid) at or above the order price.
Boerner Divider A device that reduces the see of a sample of grain while maintaining the representatives of the original sample. Used to cut the required see portion from the original sample.
BOP Branch office position. Tells us what our position is - long/short/even. Cargill’s position report indicating long/short/even by BOP code for each specific market or location.
BOT Wire abbreviation for “bought”.
Break A sharp price decline.
Broker An agent entrusted with the execution of an order, He may be employed in the office of the commission house that carries the account or a floor broker or pit broker who actually executes the order on the trading floor. See Customer’s Man.
Brokerage The fee charged by a broker for execution of a transaction. The fee may be a flat amount or a percentage.
Bulge A sharp price advance.
Bulk Carrier (BC) Ocean-going vessels that handle any bulk cargo.
Bull Market One where small supplies and/or strong demand causes prices to rise.
Butterfly Spread A spread involving purchases or sales of one futures contract month occurring between the offsetting sales or purchases of two other futures contract months.
Buy In To cover or liquidate a sale.
Buyer’s Market A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that had previously prevailed.
Buying Hedge Purchasing futures to protect against a potential rise in the future purchase price of cash commodities; futures contracts are generally bought in order to enable an investor to buy the commodity later at a fixed price. Also see Hedging.

C

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Call
  1. A period in which trading is conducted to establish the price for each futures month at a particular time (i.e., an opening or closing Call).
  2. Buyer’s Call: Time of shipment contract term. Buyer has the right to define the shipment period keeping control of the contract. The seller is unable to apply cars or trucks to a contract unless the buyer gives his/her consent.
  3. Seller’s Call: The same as Buyer’s Call with the difference that the seller has the right of determining time to price fix.
Call Option An option that gives the buyer or holder the rights to purchase a quantity of the underlying futures contract at a specific price (strike price) until or before the expiration date.
Calls and Puts Illegal in regulated commodity markets. Call, an option permitting its holder (who has paid a fee for the option) to call for a certain commodity or security at a fixed price in a stated quantity within a stated period. The broker is paid to bring the buyer and seller together. The buyer of this right to call expects the price of the commodity or security to rise so that he can call for it at a profit. If the price falls, the option will not be exercised. Option where buyer owns the option (and seller is obligated) to purchase a given quantity of the-designated commodity at a designated strike price. The reverse transaction is a Put. Option where buyer owns the option (and seller is obligated) to sell a given quantity of the designated commodity at a given strike price.
Capacity Normal load in pounds, cubic feet or gallons which the car is designed to carry. These figures are stenciled on the car.
Capesize 60-75M M/T vessel that is too large to navigate through the Panama Canal and must transit around the Cape Horn.
Car Puller A powered mechanism that moves rail cars into position for unloading or loading.
Carload For grains, may range from 1,400 to about 4,000 bushels.
Carry A situation in the futures market when the price difference between delivery months reflects the full cost of interest, insurance, and storage.
Carryover Current supplies of a commodity comprised of stocks from previous production/marketing seasons.
Carrying Charges – Carrying Costs
  1. Those costs incurred in warehousing the physical commodity generally including interest, insurance and storage;
  2. Full carrying charge market a situation in the futures market when the price difference between delivery months reflects the full costs of interest, insurance and storage.
Cars All rail movements are made in hopper cars, the standard of which is called a jumbo hopper car and is 4,600 cubic feet or larger.
Railroad Owned Cars: In almost all instances, ‘railroads own their own fleet of cars and will provide them as requested for loading. These cars arc “usually” labeled with a carrier’s initials and then the number.

Example: BN 456456 or CNW 196596.
Shipper Owned Cars: These are also known as private cars and are owned or leased by the shipper who gives handling instructions to the railroad. These cars “usually” have a car number that ends with “X” which notes it as a private car.

Example: PLCX 2544 or NAHX 487472.
Carter Dockage A machine that runs samples of grain over a. series of sieves removing the collecting dockage. Sieves are interchangeable and machine may be adjusted to perform for most grains.
Cash Broker A non-principal agent who links bids with equal priced offers for a commission on completed trades.
Cash Commodity Physical merchandise; goods available for delivery immediately or within a designated period following sale; includes a commodity bought or sold “to arrive.”
Cash Contract A sales contract for either immediate or future delivery of the actual commodity.
Cash Grain Physical merchandise; goods available for delivery immediately; also known as cash commodity or actual.
Cash Market A market in which actual commodities are bought and sold.
Cash Transaction Purchase or sale of physical merchandise. Can involve futures contracts; however, term is commonly used to differentiate between cash and futures transactions.
CBOT Chicago Board of Trade; the commodity exchange located in Chicago, IL; trades soybeans, corn, oats, hard white winter wheat, bean oil, and bean meal. Now operates as a designated contract market of the CME Group.
CCC The Commodity Credit Corporation.
CEA The Commodity Exchange Authority.
CEC The Commodity Exchange Commission.
C&F (CNF) Cost and freight paid to port of destination, abbreviated CNF.
Certified Stock Stocks of a commodity that have been graded, have passed various tests and found to be of deliverable quality against futures contracts; which are stored at the delivery points and in warehouses designated regular for delivery by the exchange.
Charter A contract governing the engagement of a vessel; can be either a daily rate or a fixed rate to destination.
Charting The use of graphs and charts in the technical analysis of futures markets to plot trends of price movements, average movements of price, and volume and open interest. See also Technical Analysis.
CIF Cost, insurance and freight paid (or included) to a port of destination. As in “CIF Gulf,” the seller pays/assumes all risk for delivering grain to a gulf port as named by buyer.
Claims Claims may be filed against a carrier for shortage of goods or for erroneous application of rate. These claims are commonly referred to as Loss and Damage Claims or Overcharge Claims and should only be filed by the person having interest or ownership of the goods or shipment involved. Other terms normally associated with claims have to do with Weights, Seals, Car Inspection or Inspection Report.
Class Classification Society (e.g., ABS – American Bureau of Shipping). All vessels must be “classed,” meaning that they are built and maintained to the standards required by the classification society. A common Class is Lloyds Highest - +100AI (IACS = International Association of Classification Societies).
Cleaning The act of removing foreign material and fines from grain. Usually done just prior to loading out, accomplished by running the grain over screens.
Clearances Total marine shipments of grain from domestic and foreign ports.
Clearing Contracts The process of substituting principals to transactions through the operation of clearing associations, in order to simplify the settlement of accounts.
Clearing Member A member of the Clearing House or Association. Each learning member must also be a member of the exchange. Each member of the exchange, however, need not be a member of the clearing association; if not, his trades must be registered and settled through a clearing member.
Clearinghouse An agency associated with an exchange that is responsible for settling trades and regulating delivery; may also collect and maintain margin monies, and report trading data.
Close The-period at the end of-the trading: session during which all trades are officially declared as having been executed “at or on the close”. The closing range is the range of prices on trades made during this designated period.
Closing Price The final price that was paid for a particular commodity at the end of a trading day; also called close or settle price.
COFO Commercially objectionable foreign odor. A grade specification which reduces grain to sample grade/ extremely low quality. A grade factor usually unacceptable to all but salvage grain dealers.
Commission Fee charged by a broker for performance of specified market functions.
Commission House – Brokerage House A concern that buys or sells for the accounts of customers.
Commission Merchant One who makes a trade, either for another member of the exchange or for a non-member client, but who makes the trade in his own name and becomes liable as principal to the other party to the transaction.
Commitment of A report issued by the Chicago Board of Trade at the end of each month which defines the futures market positions of various classes of traders.
Commodity A generic, largely unprocessed product that can be used for commerce; traded on a commodity exchange (e.g., grains, metals, minerals).
Commodity Credit Corporation A branch of the U.S. Department of Agriculture (USDA) that supervises the government’s farm subsidy and farm loan programs.
Commodity Futures Trading Commission (CFTC) A U.S. federal agency, established by the Commodity Futures Trading Commission Act of 1974, that ensures the open and efficient operation of the futures markets; five futures markets commissioners are appointed by the president and approved by the Senate.
Commodity Risk Committee (CRC) Cargill’s Commodity Risk Committee (CRC) has corporate authority for governance and oversight of commodity risk-taking, commodity compliance and related risk. The CRC authorizes trade activity and establishes commodity risk limits for Groups and Businesses that have transactional commodity risk.
Common Carrier A transportation company engaged in the business of transporting persons or goods for compensation for all persons, impartially.
Common Law That system, of law which does not rest for its authority upon any express statute, but derives its force and authority from consent, custom and usage. It is basically the law brought to the United States from England.
Common Point/Junction Point A point reached by two or more carriers.
Complete Feeds Feeds sold in a form that contains all components needed in the animal’s diet or fed in combination with a roughage like hay.
Concentrates Feeds sold in a form usually containing the protein (greater than 20% crude protein), vitamins, and minerals needed in an animal’s diet: designed to be mixed with grains and/or other energy sources to complete the ration.
Concentration Risk The level of exposure within a portfolio to a single market factor or event. Concentration risk in a portfolio can be high when dominated by a large single exposure. In other cases, concentration risk may arise from different exposures that are highly correlated to each other and/or a single market risk factor.
Example:
A portfolio dominated by a single large position (i.e. long wheat) represents a concentration risk to the portfolio. Adding length in corn to the same portfolio will add to this concentration risk as corn and wheat prices generally exhibit positive correlation to each other, which means their prices will move in tandem.
Condition Refers to the quality of the grain with respect to temperature, moisture, mold and insect infestations.
Confidence Interval A range of values so defined that there is a specified probability that the value of a parameter lies within it.
Connecting Carrier A railroad with a direct physical connection with another or forming a connecting link between two or more railroads.
Conservation Reserve – CRP Conservation Reserve Program. A 10-year government set-aside program that as part of the Soil Bank Program pays producers an annual payment if they agree to idle erodible land.
Consignee The person or firm to whom a shipment is destined. Also called receiver.
Consignment An unsold shipment of grain placed with a commission man who will offer it for sale.
Consignor The person or firm from whom a shipment originates: (also see Contract):
  1. The bilateral obligations of buyer and seller in a transaction,
  2. A unit of the commodity being traded. Orders must specie, the number of bushels to be bought and sold. Also see Round Lot.
Contango Also known as Carry, a situation where spot and/or nearby futures prices are lower than deferred futures prices. See Backwardation.
Example:
Corn price for May is 3.81$/bu and the Sept Corn price is 3.97$/bu.
Constructive Placement The time when a car becomes available for loading or unloading but the receiver has not yet ordered the car in.
Contract Grades Exchange rules list standards of commodity grades that must be met; a schedule of allowable discounts and premiums are set for commodities of higher or lower quality than the standards set by the exchange.
Contract Grades - Deliverable Grades The grades of a commodity listed in the rules of an exchange as those that can be used to deliver Deliverable Grades against a futures contract.
Contract Market An organized commodity futures market which qualified under the Commodity Exchange Act.
Contract Month A specific month, as indicated in a futures contract, in which delivery may take place.
Control Room Part of the elevator from which the flow of grain through the elevator may be controlled and monitored through remote controls and electronic monitoring devices.
Controlled Commodities subject to Commodity Exchange Authority regulation, listed in the Commodity Exchange.
Convergence The point where cash and futures prices come together as the futures contract nears expiration and the basis approaches zero.
Corner
  1. To corner is to secure such relative control of a commodity or security that its price can be manipulated.
  2. In the extreme situation, obtaining more contracts requiring the delivery of commodities or securities than the quantity of such commodities or securities actually in existence.
Correlated Stress Forward looking and subjective estimate of market loss potential; may include offsets and correlation.
Correlation A statistical parameter that quantifies the co-movement (linear association) between two random variables. The correlation coefficient can range between -1 and +1. A perfectly negative relationship of -1 would entail the assets move in opposite directions. A perfectly positive relationship of +1 implies when one asset moves up so does the other and vice versa. While a zero correlation implies no relationship at all.
Cost of Storage Rate charged for physical warehousing of a commodity. May include “in” and /or “out” elevation charges. See Carrying Charge. Usually listed in the elevator’s tariff.
Country Elevator A grain elevator located in the immediate fanning community to which farmers bring their grain for sale or storage as distinct from a terminal elevator which is located at a major marketing center.
Cover The purchase of futures and/or cash to offset a previously established short position.
C/P Charter Party.
CPB Cents Per Bushel.
Crop Reports Reports complied by the USDA on various agriculture commodities; released throughout the year, these reports feature estimates on planted acres, yield, anticipated production, and comparison of previous production.
Crop Year For agricultural commodities, the time from the beginning of one harvest to the beginning of the next harvest; varies slightly for each grain (e.g., corn/soybeans begin Sept.1 and end Aug 31).
Cross Hedge A hedge involving a hedging instrument that is imperfectly correlated with the asset being hedged.
Example:
Hedging a bond investment with futures on a non-identical bond.
Crude Vegetable Oil Oil which has undergone the first stage(s) of refinement.
Crush (Soybeans) The process which converts soybeans into meal and oil. Also, a term used to describe a particular spreading posture between soybeans and products.
Cubic Capacity Carrying capacity of a car based on cubic feet.
Cubics Space available in cargo compartments - expressed in cubic feet or cubic meters.
Cultivar Cultivar
Current Delivery The futures option/instrument which is current (i.e., current month is the same as the futures month/year, in other words the futures are nearing expiration) and therefore are eligible for deliver to meet obligations.
Currency Risk The risk associated with the uncertainty about the exchange rate, at which proceeds in the foreign currency can be converted into the investor’s home currency.
Example:
Goods priced in RMB will cause a P/L loss in USD even when the price of the commodity doesn’t change, but the RMB weakens against the dollar.
Customer’s Man – Future Commission Broker – Registered Representative An employee of a commission house, also called a broker, account executive, solicitor, or registered representative, who engages in soliciting or accepting and handling orders for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market and who, in or in connection with such solicitations or acceptance of orders, accepts any money, securities, or property (or extends credit in lieu thereof) to margin any trades or contracts that result or may result therefrom. They must be licensed under the Commodity Exchange Act when handling business in commodities covered thereby.
Cut A portion of a grain sample drawn by a manual or automatic sampling device.
CWT Hundred pound weight.
Cyclone A machine for removing, dust from dust-laden air. It blows air into a chamber where the dust-laden air moves in a circular path. Centrifugal force is used to separate the dust and it collects at the hoppered bottom of the chamber.

D

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Date Game A practice followed by some futures longs during delivery months which is aimed at the avoidance of stopping or taking physical deliveries of commodities unless carrying charges are relatively attractive or close to full. By establishing a futures long at the latest possible time/date, a trading company may avoid stopping deliveries since they are assigned by the CBOT (and other exchanges) to the oldest open futures tickets (longs) that have not been offset (by a sale).
Day Orders Those limited orders that are to be executed the day for which they are effective and are automatically canceled at the close of that day.
Day Traders Commodity traders, generally members of the exchange active on the trading floor, who take positions in commodities and then liquidate them prior to the close of the same trading day.
Default
  1. In reference to the federal farm loan program, the decision on the part of a producer of commodities not to repay the government loan but instead to surrender his crops.
  2. In futures markets, the theoretical failure of a party to a futures contract to either make or take delivery of the physical commodity as required under the contract.
Deficiency Payment Difference between target price and loan rate or market price Payment to producer for complying with program set-aside requirements. Provides the producer income protection without supporting prices.
Delivery Cash commodity transfer from the seller of a futures contract to the buyer of a futures contract.
Delivery Day In futures trading, the day on which asset delivery is to be made according to the quantity, quality, and location listed in the contract specifications.
Delivery Instrument One futures contract worth of a specific commodity indicating the contract size; called a shipping certificate.
Delivery Market Stocks – The Visible Grain stocks physically located in the delivery marketplace within qualified delivery- warehouse elevators (also referred to as elevators “regular” for delivery) and theoretically available for delivery in satisfaction of futures contracts.
Delivery Month The specific month, identified in the futures contract, when delivery occurs; also known as the contract month.
Delivery Notice The notification of delivery of the actual commodity on the contract issued by the seller of the futures to the clearing house.
Delivery Price The price fixed by the clearing house at which deliveries on futures are invoiced and also the price at which the futures contract is settled when deliveries are made. It is based on the closing futures price on the night of intentions, plus or minus, and differentials for location and/or grade factors above/below the standard set for that futures contract (e.g., #2 yellow corn).
Delta The relationship between the option price and the underlying price, which reflects the sensitivity of the price of the option to make changes in the price of the underlying.
Example:
If an option has a delta value of 0.75, this means that if the underlying commodity price increases by $1 per unit. The option on it will rise by $0.75 per unit, all else being equal.
Delta Hedge An options strategy to hedge risk associated with price movements from the underlying asset. This can occur by offsetting long and short positions.
Example:
A long call option can be delta hedged by selling the underlying commodity in a quantity equal to the option delta.
Demurrage A penalty assessed by the carriers against the shipper/receiver for detaining a car beyond the normal free time allowed for loading or unloading.
Derivative A commodity derivative is a contract between two or more parties whose value is based on an agreed-upon underlying commodity.
Dew Point Temperature at which condensation of moisture begins when air is cooled.
Discount Applied to cash grain prices that are below the future, or to deliveries at a lesser price than others (May at a discount under July) or to lesser prices caused by quality differences.
Discount Scale A listing of how a buyer will discount grain due to grade factors that do not meet contract specifications.
Dispatch Money on Ship Moneys paid for finishing loading of a ship ahead of schedule (lay days) usually included in, and varies with, the vessel’s charter.
Distant or Deferred Delivery Usually means-one of the more distant months in which futures or cash trading is taking place.
Diversion This is a provision allowed by carriers to change the name of the shipper, the consignee, or the destination after a shipment has already been billed. Approval must be given by the carrier and additional.
Diversion Payment Per acre payment producer receives for idling land. Optional. See also Set-aside.
DLQ Distinctly Low Quality. Grain that is obviously of inferior quality because it contains foreign substances or because it is in an unusual state or condition, and which cannot be graded properly by use of the other grading factors provided in the standards. DLQ shall include any objects too large to enter the sampling device.
Dockage Essentially consists of grains of non-standard and other non-grain matter which can be readily removed from grain samples by the use of appropriate sieves and cleaning devices, including those employing air currents. Dockage normally is free of cost to the buyer, deducted from the gross weight of the shipment.
Draft The depth of water available in any given port or the distance from Keel to water line of a vessel at any given condition.
Draft Requirements Distance from the water line to the bottom of the barge or vessel. During times of low water barge lines will issue maximum depth (9` to 9.5’) which will impact the cost of freight. Vessel depth restrictions exist at all ports. For example Cargill/Houston has a 32’ SWAD (salt water ambiance depth) restriction.
Draw Down The dollar value difference between the high-water mark (peak P/L) and current P/L used to highlight under performance; should be used to manage trading activity.
Formula:
Peak YTD / P/L - Current YTD P/L.
Example:
Peak YTD P/L $70M - Current YTD P/L $65M = Draw Down of $5M.
Draw Down Recovery Measures the number of days that were required to get back to the previous high-water mark or peak P/L.
Draw Up Calculates where the current P/L is relative to the high-water mark or peak P/L.
Dryer A unit which provides the conditions for removing moisture from a product.
Dryeration A modified drying process involving the portable batch or continuous-flow dryer. In this process the product is dried with heated air to a moisture level of 16-18% wet basis. The product is transferred immediately without cooling to a temporary storage (dryeration) bin equipped for aeration. The product is allowed to set for a few hours to become tempered before aeration is started. Cooling is accomplished in about 12 hours with airflow rates of about 0.007 m³m³s (1/2 cfm/bu.). At this low airflow rate, nearly all the heat in the product is utilized to further dry it. The moisture content may be further reduced 3-4% during the 12 hours of cooling.
Drying The removal of moisture from a substance involving the simultaneous transfer of heat to the substance and moisture from the substance, known as unit operation. The heat for evaporation of the moisture in the material is transferred by conduction, convection, radiation and internal heating, such as by respiration and dielectric heating. The vapor mass is transferred by diffusion or capillary flow to the surface from which the vapor is carried by a gas. As a result of drying, the biological and chemical activity of the product is decreased.
DWT Deadweight. The tonnage available for the carriage of cargo (+ Fuel/stores ) on any particular draft.
Dynamic Hedging A strategy in which a position is hedged by making frequent adjustments to the quantity of the instrument used for hedging in relation to the instrument being hedged.
Example:
The hedge position must be revised because the hedge ratio can vary through time.

E

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Econometrics The use of statistical and mathematical methods in the field of economic theories.
EIU/UU Load guarantee term. Frequently used in vessel trades this means “even if used” and “unless used.” Here you traditionally want to buy UU and sell ElU to maximize demurrage/despatch earnings. See also WWDSHEX/WWDSHINC.
Elasticity A characteristic of commodities which describes the interaction of the supply, demand, and price of a commodity. Demand elasticity - a commodity is said to be elastic in demand when a price change creates an increase or decrease in consumption; supply elasticity - the supply of a commodity is said to be elastic when a change in price creates change in the production of the commodity; inelasticity of supply or of demand exists in either of the reverse situations, when either supply or demand is relatively unresponsive to changes in price.
Elevations Profits taken on a sale contract that is recognized as the grain is loaded out of an elevator. Also used interchangeably with a “margin” as determined by a facilities-delivered price versus its FOB saleable level.
Ensilage Chopped animal feed which is stored in bulk - usually in a moist condition.
Even No position or no net position, as in the case where purchases of cash grain or futures contracts are offset by sales of cash grain or futures contracts.
Exchange of Spot or Cast Commodity for Futures The simultaneous exchange of a specified quantity of cash commodity for the equivalent quantity in futures: usually instituted between parties carrying opposite hedges in the same delivery month. Also known as “exchange for physical or against actuals, or as giving up futures for cash.” In grain, the exchange is made outside the “pit.”
Exercise An action a holder of a call option may take if the holder wants to purchase the underlying futures contract; also an action a holder of a put option may take if the holder wants to sell the underlying futures contract.
Exercise Price The fixed price at which the owner of an option can purchase (if a call), or sell (if a put), the underlying commodity; also referred to as strike price.
Expiration Date The specific date on which options on futures generally expire; usually during the month before the futures contract delivery month.
Ex-Pit Transaction A trade made outside the exchange trading ring or pit which is legal in certain instances, It is primarily used in pricing transactions involving the purchase of cash commodities at a specified basis, such as exchanges where a price within the day’s trading range can be executed at any time during the session regardless of where the market is at the time of the exchange.
Export Parity Value of a commodity sold in one country, but valued from a geographic location in the exporting country.
Extrinsic Value The amount of money by which an option premium exceeds the option’s intrinsic value; buyers are willing to purchase an option anticipating that, in time, a change in the underlying futures price will result in an increase in the option’s value; also referred to as time value.

F

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Family Farm In common usage, a non-specialized farm of modest size which is presumed adequate to support a rural family.
Farm Prices The prices received by farmers for their products, as published by the U.S. Department of Agriculture; determined as of the 15th of each month.
Farmer Owned Reserve A program which requires the farmer to store “loan” grain for 3 years in return for storage payments from the government. Grain can be sold only if market prices exceed specified release levels. It may only be opened for use when prices have fallen below certain levels.
Federal Appeal May be called at any time, but must be proceeded by an official inspection, or a reinspection or appeal, It is usually called when we believe the original inspection to be in error because of the original inspector’s interpretation of his findings.
Feed Ratios The variable relationships of the cost of feeding animals to market weight sales prices, expressed as ratios, such as the hog/corn ratio. These serve as indicators of the profit return or lack of it in feeding animals to market weight.
FGIS Federal Grain Inspection Service.
Fill or Kill Order A commodity order which demands immediate execution or cancellation.
Fines Related to grains, small diameter particles such as those which form from larger particles during handling and drying.
Financial Risk Committee Cargill’s Financial Risk Committee (FRC) establishes policy and set standards governing the assumption and management of financial risks across the corporation.
FIO Free in and out.
First Notice Day The first date that a notice of intent to deliver a commodity can be made; often given from the clearing house to a buyer.
Fixing the Price The determination of the exact price at which a cash commodity will be invoiced after a “call sale” has previously been made based on a specific number of points “on or off” a specified futures month.
Flag Threshold Each Group or business has a CRC approved flag threshold that considers a ratio to stress, share of trading budget, percent equity, and back testing/frequency. The result is a flag threshold that is material to the Group/Business.
Example:
Flag threshold could be expressed in cumulative loss/profit within x days of more than $x millions. (see P/L Flag).
Flake A soybean morsel from which the oil has been extracted.
Flash Hand signals used by pit brokers.
Flash Point The lowest temperature at which vapors above a volatile combustible substance ignite in air when exposed to flame.
Flat Bed Truck Truck which unloads out of a hatch on the back end of the vehicle. It must be physically lifted by a mechanical truck lift to completely empty contents.
Flat Price The dollar notional market value of an exposure, which equals quantity times market price. Can apply to both physical and financial positions.
Example:
Oil flat price = oil quantity * oil unit price.
Floating Boot Pulley Method for maintaining tension upon elevator belt while allowing for stretch and elasticity due to load changes. The bottom of the leg (boot) travels vertically maintaining a fixed clearance with the pulley.
Floor Broker An individual who executes futures or options orders on the exchange floor on behalf of other individuals.
Floor Phone Man An, employee of a brokerage house who serves as the communication link between his firm’s office and the brokers in the pits.
Floor Trader An exchange member who executes his own trades. by being personally present in the place provide for futures trading.
FOB Free on board. Usually covers all delivery, inspection and elevation costs involved in putting commodities on board whatever shipment conveyance is being used.
Forage Natural pasture for livestock.
Foreign Exchange Different currencies that exist throughout the world; international trade is transacted in the U.S. currency denoted as $USF (U.S. Funds); Importers and exporters need to exchange their home currency into $USF to complete the transaction.
Foreign Materials – FM Essentially consists of all matter, including nonstandard sized kernels/seeds and pieces/splits of the grain or oil seed being graded, which will readily pass through a sieve of prescribed dimensions and all other matter other than the grain or oil seed being graded remaining on such sieve after sieving. When applicable on contracts, excess foreign material (FM) car be either discounted or deducted from the gross weight of the shipment.
Forward Contract A privately negotiated cash contract where a seller arranges to deliver a cash commodity to a buyer at some point in the future.
Forwarding Team that controls and tracks the flow of vessel/rail documentation. Involved in establishing requirements for letters of credit and insuring all contract terms and requirements match what the merchandising staff sold. This department or function is extremely important in managing our export programs.
Forward Curve The shape of the forward market if you were to plot price on the y axis and maturities on the x axis. A series of forward rates, each having the same timeframe, representing today’s market value for that specific time bucket.
Free Grain Grain that is free to be loaded out, i.e., if a warehouse receipt was issued, it has been canceled; if held as an unreceipted unload, it is collateral.
Free Supply The quantity of a commodity available for commercial sale: does not include government-held stocks.
Free Time Time allowed by carriers for the loading or unloading of freight after which demurrage or detention charges will accrue.
Freight Bill An invoice from the transportation company for services they’ve provided outlining their charges.
Freight Rates

Fall into two basic categories, Tariff Rates and Contract Rates:

Tariff Rate is a railroad’s price list. It must be filed with the Interstate Commerce Committee (ICC) and be available for all to use. A carrier may have multiple rates between the same origin and destination so it is important to match the proper rate to the right application.

Contract Rate is negotiated with the railroad. There is typically some type of added requirement associated with a contract. A volume commitment is very common and usually leads to an added incentive from the carrier (for example, a cheaper freight rate). Rail contracts must also be filed with the ICC. Current ICC requirements state that tariff rate increases require a twenty-day notice to take effect.
Friction Surface Belt Stucco textured belt able to carry grain up an incline, prevents grain from rolling back down incline.
Full Carry A Chicago delivery term. It is the relative value of space. With regard to the delivery of grain in Chicago, it is the total storage cost and interest associated with carrying grain from one delivery option to the next.
Full Carrying Charge Market A futures market where the total costs of storage, interest, and insurance are reflected in the price difference between delivery months.
Fumigant An insecticide used to destroy insects in grain. May come in solid, liquid or gaseous form. Active form is gaseous, poison; may be toxic to humans also.
Fundamental Analysis An approach to analysis of futures markets and commodity futures price trends which examines the underlying factors which will affect the supply and demand of the commodity being traded in futures contracts. For contrast, see also Technical Analysis.
Fundamentals An approach to futures market analysis and price trends that examines the underlying factors which will affect the supply and demand of the commodity being traded (income, carry-out stocks, seeded acres, government policies); also known as fundamental analysis.
Fungibility The characteristic of total interchangeability. Futures contracts for the same commodity and delivery month are fungible due to their standardized specifications for quality, quantity, delivery date, and delivery locations.
Futures Contract Agreement made on the futures exchange trading floor to buy and receive or to sell and deliver a commodity at a future date; agreements are standard according to quality, quantity, delivery time and location.
Futures Exchange A central market where buyers and sellers trade futures and options on futures contracts; rules and regulations must be followed.

G

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Gamma A numerical measure of how sensitive an option’s delta is to a change in the underlying price.
Example:
An option has a delta of 0.65, gamma of 0.10 and underlying price is $50. If the underlying price moves to $49 the delta will become 0.55 (i.e. gamma expresses the change in delta).
Gap A situation where the trading range (high and low) closes outside the range of the previous day.
Example:
On day one, the trading range is $200 - $205. On day 2, the trading range is $208 - $213. There is a $3 gap between $205 and $208 from day 1 to day 2.
Gate Value A value used to control the flow of material.
GATT General Agreements on Tariff and Trade.
Gear Refers to the vessel’s equipment for cargo handling (e.g., cranes/derricks).
Gear Reducers Series of gears mounted in a box to reduce speed of an electric motor to given driven speed.
Gearless A vessel having no means of its own to load or discharge cargo. Shore cranes or other means have to be utilized.
Generic Certificate A form of currency issued by the USDA primarily to producers as payment for participation in various farm programs.
Give up A contract executed by one broker for the client of another broker, which the client orders turned over to the latter broker. Generally speaking, the order is sent over the leased wires of the first broker who collects a wire toll from the other broker for the use of his facilities.
Good-Til-Cancelled (GTC) Open Order: an order which will remain open for execution at any time in the future until the customer cancels it.
Grade The classification of the quality of grain.
Grain Futures Act A federal statute which regulates trading in grain futures.
Grain Terminal A grain elevator facility able to ship grain by rail and/or barge to domestic and/or foreign markets.
Grains For purposes of the Chicago Board of Trade: wheat, oats, rye, com and soybeans.
Gross Load Weight The weight of a car and its contents.
Gross Processing Margin In the case of soybean, GPM refers to the difference between the price paid for soybeans and the sum of prices received from the sale of oil and meal products after processing.

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Handy A smaller vessel, approximately 25,000 metric tons, which can easily maneuver into and out of most ports.
Hard Spot An interval of strength in the market usually resulting from considerable buying.
Heater An over-current protective device, protects motor against dangerous overheating due to overload and failure to start.
Heavy This is applied to a market where there is an apparent number of selling orders overhanging the market without a corresponding amount of buying orders.
Heavy-Axle Railcars Railcars designed to hold heavier loads in slightly larger cubic capacity.
Hedging A risk management tool that allows investors to protect themselves from the price fluctuations associated with taking ownership of physical product by making an equal but opposite transaction in the futures market from that held in the physical cash grain market.
Example:
Buy grain in the country, and then sell futures in the commodity exchange to hedge the futures component of the price.
Hedging Example:
Buying gold futures to mitigate downside price risk when having a long physical gold positions, as the futures contract locks in the price of the physical position.
Hedge Ratio The relationship of the quantity of an asset being hedged to the quantity of the derivative used for hedging.
Example:
To hedge 1000 mt of physical wheat, we need to buy 1100 CBOT wheat as the hedge ratio in this case is 1.10.
High On the futures market, the highest price of the day for a futures contract.
High Lysine Corn Corn with higher Lysine percent as a result of genetic and growing environment.
High-Cube Railcars Railcars with expanded cubic capacity designed to hold more grain than standard railroad equipment cars.
High-Frequency Trading (HFT) A special class of algorithmic trading in which computers make elaborate decisions to initiate orders based on information that is received electronically, before human traders are capable of processing the information they observe.
High Water Mark High Water Mark is the peak P/L as used in draw up/draw down calculations with in RMG The terminology is mostly used in financial trading (money/hedge funds).
Hit Ratio Represents the ratio of trading days that end with a gain, versus trading days that end with a loss; Highlights days of positive performance; best when partnered with P/L Ratio.
Formula:
Number of Positive Trading Days/Number of Total Trading Days.
Example:
Number of Positive Days 105; Number of Total Trading Days 189… 105/189 = 55.6%.
Hopper Truck Truck with hatchels/slides along bottom of multiple compartments such that by opening them the truck can unload completely via gravity flow.
Hot Spot Grain that has become hot as a result of excessive respiration.
House Weight Weighing certificate issued by licensed company employees (distinct from “official weights” supervised by a regulatory agency).
HSS Heavy grain/soyas/sorghum.

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ICC Interstate Commerce Commission.
IFO Intermediate Fuel Oil: the most common type of oil burned in a vessel’s main engine.
Import Parity Value of a commodity bought from one country, valued at a geographic location of interest in the importing country.
Implied Volatility The market volatility which is used to solve for the value of the option price. Option price can be calculated through an options model (f.e. Black Scholes) using commodity price, interest rate, time to maturity, volatility and strike price. All else are given, implied volatility can be calculated if we have the market price of the option.
In Bond The most common type of oil burned in a vessel’s main engine.
Incremental VaR Defines the incremental impact to VaR given a specified unit addition/reduction to the portfolio. In other words, an increase or decrease to the portfolio is due to the sensitivity of a position to the overall portfolio. A defined unit could be a contract or a dollar value.
Incremental VaR Example:
The incremental December wheat VaR is $100k for a contract of December wheat futures. If a portfolio has a VaR of $20m and an additional contract of December wheat is added it would result in a portfolio VaR of $20.1m.
Indication – Intimation A tentative or subject bid. A less-than-firm expression of willingness to buy at a specified price.
Indirect Labor Labor that is supportive in an elevator as opposed to being directly involved unloading, storing and loading grain.
Initial Margin The amount of money or eligible securities a futures market participant must deposit into his/her margin account before buying on margin; amount is required by the Federal Reserve board and the participant’s brokerage; also referred to as original margin.
Inspection – Official Inspection In Cargill Grain, an official evaluation procedure which results in a grade or class designation being assigned.
Inspection and Disposition (Orders) In some markets grain is shipped from an origin to an Inspection point where the grain is sampled and graded. From there orders (or disposition) are given to the carrier to complete the move to final destination. Rates which allow for this service are normally higher than the rates which move the grain direct.
Interline Movement between two or more railroads.
Interlock System Relay system that shuts down or prevents a grain conveyance system (commonly a leg, automatic turnhead and one or more belts) if one component malfunctions.
Interest Risk Rate The exposure of a portfolio to changes in interest rates. Can be expressed as a DV01, which represents dollar value impact on the portfolio of a 1 basis point change in interest rates.
Example:
If a portfolio has positive $500k DV01 exposure to US government interest rates, then a 10 basis point decline in US Treasury yields will result in a positive $5 million gain to the portfolio.
In-the-Money Option An option that has intrinsic value; for a call option, a situation where the strike price is below the current market price of the underlying futures contract; for a put option, a situation where the strike price is above the current market price of the underlying futures contract.
Intrinsic Value The amount by which a call option is in-the-money; determined by taking the difference between the strike price and the current price of the underlying futures contract; a put option is in-the-money if the strike price is greater than the current price of the underlying futures contract.
Inverse A futures market in which the nearer month is trading at a premium (higher) than the deferred (distant) months; tends to mean a shortage of supply.
Invisible Supply Uncounted stocks in the hands of wholesalers, manufacturers and producers which cannot be identified accurately; stocks outside commercial channels, but available for commerce.

J

Job Lot A unit of trading smaller than the regular round lot, usually, in grains, 1,000 or 2,000 bushels. No job lots are traded on the Chicago Board of Trade.
Junction Point The point where two carriers meet to interchange traffic.

K

Kiln Dried (KD) Corn that has been dried to a specific moisture content.

L

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Laker A large freighter used in the Great Lakes.
Last Trading Day The last day that a futures or options contract may trade or be closed out before delivery of the underlying asset must occur or money must be exchanged.
Laycan Laydays/cancelling. The time period within which the vessel must be made available to the charterer.
Laytime Time allowed by owner to charterer to load/discharge the vessel, expressed in days or daily load/discharge rate in tons.
Leg A vertical, enclosed conveyor belt that has buckets attached to the belt which elevates grain. the grain is discharged by centrifugal force at the top of the enclosure.
Letter of Warning A written notice. Issued by the CEA to an individual or firm, advising of an improper practice or specific violation of law, trading regulations, etc.
Life of Delivery (or) Contract The period between the beginning of trading in a particular future to the expiration of that future.
Limit (Up or Down) The maximum price advance or decline from the previous day’s settlement price permitted in one trading session by the rules of the exchange.
Limit Only In trading, the definite price stated by a customer to a broker restricting the execution of an order in one trading session by the rules of the exchange.
Limit Order An order provided to the broker in which the customer has specified a limit on the quantity, price, and/ or execution timeframe.
Liquid In a commodity market, the characteristic of a commodity that has enough supply on hand that a large transaction may occur without causing a significant change in the commodities’ price.
Liquidating Market One in which the predominant feature is longs selling their holdings.
Liquidation The closing out of a long position. It is also sometimes used to denote closing out a short position, but this is more often referred to as “covering”.
Liquidity Risk Any risk of economic loss that stems from attempting to buy or sell a quantity greater than the market order flow can absorb. Typically, when this happens, the bid offer spread in the market will widen, which increases execution costs as the market attempts to attract additional volumes.
Example:
The bid/offer spread for soybean meal typically is less than $1 per ton on average market volume. If a person has a position that represents a significant % of the daily market volume, attempting to unwind this position in a single day will cause the bid/offer spread to widen as the market attempts to attract additional volumes to fill the order. Thus, liquidity risk represents the potential loss of unwinding a position from an execution standpoint.
LOA Length Overall.
Loan Order ldentify grain to be shipped, specify grade factors to be met and give all information necessary for shipping grain in terms of quality and quantity. It gives the superintendent authority to load grain out of the elevator.
Loan Price The statutory price at which growers may obtain crop loans from the government.
Loan Program The primary means of government price support in which the government lends money to the farmer at a pre-announced price schedule with the farmer’s crop as collateral. The primary method by which the government acquires stocks of agricultural commodities.
Loan Rate Government support price, price at which government agrees to lend producers money on eligible bushels. Price at which government agrees to purchase grain.
Lock and Dam System A stair-stepping system of dams with locks that allow barge traffic to transit the River System, The Corporation of Engineers administer the L/D system. This system is one of the primary reasons the U.S. has the most efficient grain handling system in the world.
Long Someone owns a physical “cash” grain in storage, has bought grain on purchase contract, “DD contract,” or bought commodity futures; if you are “long” you think the price is going to appreciate or go up.
Long the Basis This is said of one who has bought cash or spot goods and has hedged them with sales of the futures.
He has, therefore, bought at a certain basis on or off futures and hopes to sell at a better basis in thevfuture for a profit.
Lotting System Used to identify the kind and quality of the various types and varieties of grain as grouped in the bins in an elevator.
Low On the futures market, the lowest price of the day for a futures contract.
Low Stress Grade Corn Corn with fewer stress cracks, valued by certain coca millers for ability to minimize starch loss prior to processing.

M

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Manometer An instrument used to measure the pressure of fluids. The difference in elevation of the liquid in a tube can be measured to determine the pressure developed on one end of the manometer.
Margin The amount deposited by buyers and sellers of futures to insure performance on contract commitments; serves as a performance bond rather than a down payment.
Margin Call A request to deposit either the original margin at the time of the transaction, or to restore the guarantee to “maintenance margin” levels required for the duration of the time the contract is held.
Marginal VaR The relative VaR addition or reduction that will occur by removing a position from the portfolio.
Example:
If the portfolio VaR is $20mm and the marginal VaR of wheat is +$11mm, this would entail that removing the whole wheat portfolio from the overall portfolio would decrease the overall portfolio VaR by $11mm to $9mm.
Market An order to buy or sell immediately at the best available current price. A market order is the default option and is likely to be executed because it does not contain restrictions on the buy/sell price or the timeframe in which the order can be executed.
Market Order A buy or sell order to process the purchase or sale order of a futures contract to be filled at the best price that is currently available.
Marketing Loan Secretary has the discretionary power to change the repayment level for loans. Most common repayment level is the “World Market Price”.
Marketing Quota A federally enforced restriction on the amount of a commodity that a producer is permitted to sell. Usually conforms to the quantity of wheat, cotton, etc. the farmer can grow on his acreage allotment.
Market Risk Market Risk describes the loss potential from an exposure or portfolio exposures to fluctuations in market prices.
Maturity The period within which a futures contract can be settled by delivery of the actual commodity; the period between first notice day and last trading day.
MDO Marine diesel oil. Fuel used in the vessel’s auxiliary engines.
Meger An instrument used to measure resistance to ground. To test insulation quality in an electric motor.
Members’ Rate The commission charge for the execution of an order for a person who is a member of and thereby has a seat on the exchange. It is less than the commission charged to a customer who does not have a seat on the exchange.
Millwright Maintenance personnel.
Minimum Price Form of contract where seller (usually a producer) sells a cash bid less a premium for purchase of a call option that allows seller to profit if futures markets rises. The net of the cash bid minus the call option premium is the “minimum price” the seller will receive even if the futures prices do not rise enough to economically justify execution of the call option.
Mix-and-Blend Taking in more discounts than we ship out so we can make an additional margin.
MOC (Market on Close) An order entered sometime during the day that grants discretionary power to the trader, so that, as near as possible to the end of the trading day, a market order will be executed.
Moisture The water content of the grain as determined by approved equipment. An important factor In grain, excessive moisture will cause grain to deteriorate.
Monte Carlo Simulation A simulation process that involves generating a large number of potential market scenarios under which a position or portfolio is revalued to determine the gain/loss under each scenario. These portfolio outcomes are then aggregated into a histogram distribution, which can then be used to quantify the exposure and likelihood of occurrence. Due to the large number of scenarios and position revaluations, Monte Carlo Scenarios tend to be computationally intensive and require significant computer resources to execute.
Morphology The form and structure of a plant.
Multi A multiple car rail unit. It can vary from sizes of 3-car multis to 100-car multis, depending upon the market. It is the standard unit size by which commodities are traded in different markets.
Mycotoxins Toxic compounds produced by fungi growing in grain. Examples are aflatoxin, fumitoxin, and vomitoxin.

N

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NAFTA North American Free Trade Agreement.
National Futures Association (NFA) An industry wide, self-regulatory organization for the U.S. futures industry. Primary responsibilities include developing rules, programs, and services that maintain market integrity, protect investors, and help its members meet regulatory responsibilities.
Negative Import Margin Imported price is higher than the domestic product replacement.
Negotiable Warehouse Receipt Document issues by a “regular” warehouse, which guarantees existence and grade of commodity held in store. Transfer of ownership can be accomplished by endorsement of the warehouse receipt.
Net Margin Net profit/loss of a trade after all costs have been considered.
NGFA National Grain and Feed Association.
No Basis Established Form of contract where neither basis nor futures are established but grain is delivered to purchaser and remains to be priced (both basis and futures) at a later date.
No Price Established (NPE) A form of cash grain contracting which, while initially establishing neither an unpriced basis nor a fixed flat price, does transfer title and risk of loss to the buyer upon delivery and provides the seller with the option of subsequently fixing a price related to bids made by the buyer for nearby delivery to the same location as that at which the contracted grain was originally received. This form of trading is sometimes referred to as deferred price contracting. Form of contract where neither basis nor futures are established but grain is delivered to purchaser and remains to be priced (both basis and futures) at a later date.
Nominal Price A declared price for a futures month. Used at times to designate a closing price when no trading has taken place in that particular contract during the final few minutes of the trading session. It is usually the average between the bid and asked prices.
Non-Fundamentals An approach to looking at relative value using indicators such as stochastics, candlestick patterns, volatility, Bollinger bands, volume and open interest, 4/8/19 simple moving averages, and time spreads.
Non-fundamental indicators are often used by a market participant who does not have a strong fundamental reading. See Technical Analysis.
Non-Recourse Loans A loan under the U.S. agricultural program to farmers on the security of surplus crops which are delivered to the government and held off the market. The loan must be liquidated as provided by the government’s program, but the government has no recourse against the farmer for a deficiency if the security fails to bring the amount of the loan.
NOR Notice of readiness. The time when the vessel presents itself to the charterers or their agents as being in all respects ready to load/discharge the cargo.
Normal Distribution A distribution of random variables that conform to the Central Limit Theorem, which states that the average of sample observations drawn at random will converge to the average of the entire distribution. The distribution takes a symmetric bell- curve shape and the level of dispersion is such that approximately 66% of the observations will fall within +/- one standard deviation.
Notice Day Any day on which notices of intent to delivery on futures contracts may be issued.

O

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OCO One cancels other, in which filling of one order cancels customer’s alternative order.
Offer A price at which a trader is willing to sell; also known as the asking price.
Off-Grade A grade different than the grade of the grain in the major portion of the lot. Also, a grade which does not meet specifications as contracted.
Official Inspection See Inspection.
Offset Usually the liquidation of a long or short futures position by an equal and opposite futures transaction.
Off-Under In quoting the basis, the number of points the cash price will be off or under specified fixtures price.
Oils In commodity trading usually includes soybean oil, cottonseed oil, olive oil and other edible fats that are broadly substitutive.
Omnibus Account An account carried by one futures commission merchant with another, in which the transactions of two or more persons are combined rather than designated separately and the identity of individual accounts is not disclosed.
On Consignment Usually refers to grain conveyed to a broker for sale in the cash market.
On-Over In quoting the basis, the number of points the cash commodity is above or over a specified futures month.
Open Contracts Contracts which have been bought or sold without the transaction having been completed by subsequent sale or repurchase or actual delivery or receipt of commodity.
Open Interest The full number of futures or options contracts that have not been exercised, fulfilled by delivery, or expired.
Open Interest The total of unfilled or unsatisfied contracts on one side of the market. In any one delivery month the short interest always equals the long interest, since the total number of contracts sold must equal the total number bought. As a futures contract proceeds toward expiration in a delivery month.
Open Outcry Required method of registering all bids and offers in the pits.
Opening Range – Closing Range In open auction with many buyers and sellers, commodities are often traded at several prices at the opening or close of the market. Buying or selling orders at the opening might be filled at any point within such a price range.
Option (call/put) An agreement that gives the taker (purchase) the right, but not the obligation, to buy from or sell to the grantor (seller) of the option at any time before its expiration.
Option Buyer The buyer of either a call or put option; option buyers have the right to assume a futures position, but are not obligated to do so; also referred to as a holder.
Option Premium The amount per share that the buyer of an option pays to the seller.
Original Margin The margin needed to cover a specific new position.
Out-of-Condition Grain which has deteriorated in soundness. e.g., heating, sour or musty grain.
Out-of-the-Money Option An option with no intrinsic value; a call option whose strike price is above the current market price, or a put option whose strike price is below the current market price.
Overload When a car is loaded beyond its maximum capacity weight limit.
Oversold or Overbought Markets When the speculative long interest has been drastically reduced and the speculative short interest increases; actually or relatively, a market is said to be oversold, At such times, sharp rallies often materialize. On the other hand, when the speculative short interest decreases sharply, a market is said to be overbought, At such times, the market is often in a position to decline sharply.
Oversupply A market situation in which available commodities exceed demonstrated demand. Result is usually seen in lower prices.

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Panamax A vessel with approximately 50M M/T that can navigate through the Panama Canal.
PANDI Club Protection and Indemnity Club. A system of mutual insurance to cover a ship owner’s liabilities toward third parties (e.g., cargo claims/ damage to berths/ injuries to stevedores).
Paper Profit The profit that might be realized if the open contracts were liquidated as of a certain time or at a certain price. Margin requirements are adjusted according to paper profits, hence they are to some extent “real.”
Parity A theoretically equal relationship between commodity prices and all other, prices. Equality of relationship. Specifically, in farm program legislation, parity is defined in such a manner that the purchasing power of a unit of the commodity is maintained at the level prevailing during some earlier historical base period.
Pelican A device used for cutting across a flowing stream of grain in order to obtain a representative sample for grading purposes.
Pignoration Agreement whereby seller utilizes sales customer’s storage space at destination to bring in grain to be priced out as it is used by the sales customer, usually via an agreed upon price mechanism.
PIK Payment in Kind. Government payment for participating in various farm programs is in commodities versus cash.
PIK & Roll Term used to describe the procedure a producer follows in redeeming government commodities with generic certificates.
Pipeline The grain in transit to market.
Pit Broker A broker who works in the pit filling futures contract orders for customers.
Pits – Rings Designated locations on the trading floor where futures trading takes place in particular commodities.
Placement Date Constructive placement occurs when the railroad is unable to place cars on elevator tracks for loading or unloading due to the elevator’s inability to accept the units when they arrive. Actual placement is when the cars are placed on the elevator’s tracks.
P/L An abbreviation for “Profit and Loss”, which represents gains and losses generated over a period of time.
P/L Event A P/L event is characterized by a material gain or loss in the P/L in a narrow timeframe (15 days) and is typically driven by significant position sizing and/or significant price change.
P/L Flag A P/L Flag is intended to signal that a P/L Event is occurring, or has occurred, and has reached a threshold of materiality that warrants informing the Commodity Risk Committee (CRC).
Example:
A cumulative loss or gain within x days of more than $x millions can be a P/L Flag.
P/L Ratio The ratio of average earnings over all positive trading days, to average earnings over all negative trading days. The P/L Ratio highlights the magnitude of the up days relative to the down days; best when evaluated in conjunction with Hit Ratio. Simply, when the ratio is above 1.0 then the average positive day is greater than negative.
P/L Ratio Formula:
Absolute Value (Average Positive Day P/L/Average Negative Day P/L).
Example:
Average Positive Day $1.5M; Average Negative Day $(1.0M)
Absolute Value($1.5M/($1.0M)) = 150%.
Plugged Load Unevenly loaded truck or car with respect to kind or quality of grain.
Point The minimum price fluctuation in futures. In grains it is 1/4 of one cent.
Pool Return Outlook A forecast or projection of what the final price will be for a specific grade and protein of wheat, durum, and barley.
Position Limit The maximum number of contracts one can hold “open” under the rules of the C.E.A.
Position Trader A commodity trader who either buys or sells contracts and holds them for an extended period of time, as distinguished from the day trader, who will normally initiate and liquidate a futures position within a single trading session.
Positive Import Margin Imported product price is lower than the domestic product replacement.
Pre-Hedges Within CGD the branch offices are asked each day before the close of the CBOT what they think they will buy flat price at each of their locations. The product line merchants will in turn sell/buy an appropriate amount of futures before the close to offset those expected purchases. By doing this Cargill reduces their flat price risk exposure on those purchases made by the branches overnight.
Premium The excess in price at which one delivery or quality of grain is selling over the value of another delivery, or quality, or the price relationship between cash and future.
Pre-Mixes Feeds sold in a form usually containing only the minerals and vitamins needed in an animal’s diet. Designed to be mixed with protein, energy and roughage sources to complete the ration.
Price Limit The maximum and minimum prices that a commodity is allowed to reach during a session; set by the exchange; also referred to as daily trading limit.
Price Limit Order An order in which the customer specifies the price at which a trade can be performed.
Primary Market – Country Market The centers to which the farmers bring their crops for sale, such as country grain elevators.
Protein The complex chemical nitrogenous compounds of plants and animals. Proteins are composed of amino acids, or which twenty are known and eight are essential to the human diet. Overly heated proteins may be difficult to digest.
Public Elevators Grain storage facilities in which space is rented out to whomever wishes to pay for it; where grain is stored in bulk. These are licensed and regulated by the state and/or federal government, and may also be approved as regular for delivery on an organized commodity exchange.
Purse and Sales Statement A statement sent by a commission merchant to a customer when his futures position has changed. It shows the amount involved, the prices at which the position was acquired and closed out, the gross profit or loss, the commission charges and the net profit or loss on the transactions.
Put Option An option that gives the buyer, or holder, the right to sell (go “short”) the underlying futures contract at the strike price at or before an expiration date; the holder is not obligated to do so.
Put Thru Elevator loads plus unloads divided by two.
Pyramiding Using the profits on previously established positions as margin for adding to that position.

Q

Quotations The changing prices on cash grains and futures.
Quote A tentative or subject offer. A less-than-firm expression of willingness to sell at a specified price.

R

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Rail Car Markings Markings that contain information such as cubic capacity, load limit, tare weight and car number.
Rail Rates Rail freight rates come in many forms and fashions. They can be reflected in cents per cwt, dollars per ton, or dollars per carload. The various types of rates are as follows:

Combination Rate: This rate involves two or more rail carriers with each carrier publishing their own individual rate, the sum of which is the total rate from origin to destination.

Example:
The SOO publishes a rate from Minot. ND to Kansas City. MO. The ATSF publishes a rate from Kansas City to Houston. TX, the sum of the two rates (ex. Minot to Houston) becomes the combination rate.
Contract Rate: A rate that is not published in a tariff. It is a rate that has been agreed upon by a railroad(s) and shipper or receiver and generally involves reduced rate levels in exchange for guaranteed volumes.
Rail Rates

Joint Line Rates: Anytime two or more carriers are involved in a single factor rate, it is considered a Joint Line Rate.

Example:
The SOO and the ATSF publish one total single factor rate from Minot to Houston.

The SOO hauls it to Kansas City and then gives it to the ATSE for the move to Houston. One freight bill is issued and the 2 railroads divide the revenue up among themselves.

Local Rate: When only one carrier is involved in a move from an origin to a destination, this is considered a local rate.

Example:
The SOO hauls a shipment from Minot to Duluth, MN. No other carrier is involved and all revenue is for the account of the SOO.
Rail Rates Mileage Rates: Carriers will publish a scale of rates from a territory to a market or group of markets based on mileage. The shipper must look up the distance between the origin and the destination, then apply that distance to the rate scale.
Example:
On a shipment from Carrington, ND to Duluth, the mileage on the 13N is 399 miles. This in turn is applied to the rate scale.
Tariff Rate: Is a schedule of rates or charges published by the railroads and is used to explain the services a carrier will perform and the price for that service, On regulated commodities these tariffs must be on file with the Interstate Commerce Commission to be considered legal. Tariffs are commonly called the railroad’s price list.
Range The difference between the highest and lowest prices recorded during a specified trading period.
Realizing Taking profits or losses.
Reconsignment A change to the waybill in the name of the shipper, consignee, destination, route or other instructions regarding delivery of the car. Reconsignment is done while the shipment is still at origin, which makes it different than a diversion.
Recovery Advance after a decline.
Redelivery The act of selling and re-intentioning delivery receipts stopped previously.
Regulated Commodities Those commodities over which the Commodity Exchange Authority (CEA) has supervision are known as “regulated.” This does not mean that the prices are controlled. The CEA simply concerns itself with the orderly operation of the futures market and at times, investigates abnormal price movements. Under the Commodity Exchange Act, approved June 15, 1936, definite regulations were established providing for the safeguarding of customer’s money deposited as margin.
Relative Humidity Ration of actual water vapor pressure to the pressure of saturated water vapor at the same temperature.
Relative Value Method for determining a commodities value in one market, in respect to the same commodity in another market.
Reporting Limit Sizes of positions set by the exchanges and/or by the Commodity Exchange Authority at or above which commodity traders must make daily reports to either or both the exchange and the Commodity.
Exchange Authority as to the size of the position by commodity, by delivery month, and according to the purpose of trading, i.e., speculative or hedging.
Representative A uniformly divided part of a representative sample done with a divider.
Representative Sample A sample obtained by official inspection that is of the proper size (approximately 2-1/2 quarts) and handled in a secure manner.
Resistance In technical trading, a price area where new selling will emerge to slow down an increase in the futures price.
Restricted Stocks Loan stocks, etc. A separate segregation which, during recent years of control, has been applied to supplies officially off the market for a definite or indefinite period.
Retender The right of holders of futures contracts who have been tendered a deliver notice through the clearing house to offer the notice for sale on the open market, liquidating their obligation to take delivery under the contract; applicable only to certain commodities and only within a specified period of time.
Rex Refers to a reinspection, may be called for by a shipper when he thinks the official grade is too low. A rex may be called by the buyer when he thinks the grade may be too high. Ordinarily, the last official grade applies on the sale whether it is fixed after or before the sale is made.
Risk and Reward The relationship between the amount a position, transaction or deal is expected to make versus the amount it could potentially lose based on a change in assumption which impacts market inputs including fundamentals, and non-fundamentals factors.
Risk Unit A risk metric utilized by RMG to quantify market and credit risk within Trade and Structured Finance (TSF). Risk Units are a blend of quantitative and qualitative factors which include the credit rating of the country, the credit rating of the obligor, liquidity, tenor, and structure factors.
River House Terminal elevator located on an inland waterway, barge load primary function, may be capable also of shipping by rail/truck.
Round Lot A contract trading unit. Round lots of grain are 5,000 bushels.
Round Turn The completion of both a purchase and an offsetting sale of futures or vice versa.
Route Directions on exactly how a shipment will move from origin to destination.

S

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Saltie An ocean-going vessel (salt water vessel).
Sample
  1. A representative portion of grain being unloaded or loaded.
  2. In marketing, one or more units of a product given free (or sold at a price far below market) in order to induce prospective buyers to give it a trail, or to enable them to determine its characteristics.
Sample Grade In commodities, usually the lowest quality grade designation, one which normally is not acceptable for delivery in settlement of a futures contract.
SATPMSHEX Saturday noon, Sundays and Holidays excluded.
SB Safe Berth.
Scale Ticket A punched or printed ticket that indicates the weight of a truck or draft of material.
Scalper A speculator operating on the trading floor who provides market liquidity by buying and selling rapidly, with small profits or losses and who holds his position for a short time. Typically, a scalper stands ready to buy at a fraction below the last transaction price, and to sell at a fraction above.
Scalping Selling or buying grain from one person and doing the opposite transaction to another party at a higher or lower price depending upon the transaction; i.e., buy grain from a farmer at $4/bu and sell it to Staley at $4.10/bu. which nets you a 10 margin without even handling the grain at your facility.
Screw Conveyor A conveyor that has a screw auger inside a casing used to move usually small quantities of material.
SD Single deck.
Seller’s Market A condition of the market in which there is a scarcity of goods available and hence sellers can obtain better conditions of sale or higher prices.
Seller’s Option The right of a seller to select, within the limits prescribed by a contract, the quality of the commodity delivered and/or the time and/or place of delivery.
Selling Hedge Selling futures to hedge cash purchases in present or future. Also see Hedging.
Set-a-Side Base crop acreage that producer is: required to idle in order to qualify for program benefits. Set-aside can be paid or unpaid.
Settlement Price The daily price at which the Clearing House clears all the days’ trades; also a price which may be established by the Exchange to settle contracts not liquidated because of Acts of God, such as floods, market congestion or other causes.
S/F Stowage Factor. Usually expressed in cubic feet/metric tons or long tons; e.g., HSS = 49 cubic feet per tong ton.
SHEX Saturdays, Sundays and holidays excluded.
SHINC Saturdays, Sundays and holidays included.
Short The selling side of an open futures contract; also refers to a trader whose net position shows and excess of open sales over open purchases.
Short Line A railroad operating over a short distance which may be a feeder for one or more larger railroads.
Short of the Basis This is said of a person or firm who has sold cash or spot goods and has hedged them with purchases of futures. He has therefore sold at a certain “basis” and expects to buy back at a lower basis for a profit.
Showcase Space that is regular for delivery, i.e., for grain registered for delivery.
Shrinkage Grain shrinks in both weight and volume when dried. The volume of shrinkage for shelled corn is relatively high compared to other grains, figured using table for varying amounts of moisture removal.
Sieve An instrument with a meshed or perforated bottom used to separate coarse material from fine and to check samples for infestation, condition and uniformity.
Skewness A measure of the asymmetry of the probability distribution.
Example:
Normal distribution has skewness of 0, meaning the Normal distribution is symmetric.
Slate Position – Flat Price Position The net exposed or unhedged position in a given commodity. The net difference between total sales of fixtures and/or cash and total purchases of futures and/or cash.
Slide or Gate A metal plate mounted in an opening through which grain passes. Can be opened variably to regulate flow of grain.
Soil Bank A government program designated to take farmland out of productive use. The government pays the farmer to not plant crops but instead to plant the land in grass or trees.
SP Safe Port.
Speculators A person using the futures market for a purpose other than hedging and willing to assume varying degrees of risk in exchange for potential profit.
Spot Usually refers to a cash price for a physical commodity that is ready for immediate delivery.
Spot Economy Physical goods available for immediate delivery following sale. Improperly used to include a commodity bought or sold “to arrive.” Also called “actual.”
Spot Price The current or nearby price at which a physical commodity is selling at a designated place.
Spotting the Board Process whereby (usually with product line approval) two parties agree to purchase, sell or price a basis contract at the current futures market before or without actually buying/selling futures on the CBOT; i.e., the transaction is priced by merely “spotting” where the current futures are trading.
Spoutline Fine material that collects in a cone or column directly beneath an overhead spout from which a bin or tank is filled. When corn or beans containing 2-3% fines are loaded into a bin, the spoutline may contain 50% fines. Consists of seed fragments and weed seeds. Storage hazard, susceptible to mold, heating.
Spoutliner Substance superior to metal. It is resistant to abrasive wear; urethane is commonly used; prolongs life of spouts.
Spread The difference in price between two related commodities.
Spreading – Spreads – Straddles These terms mean the same thing, but in practice the grain trade uses the term “spread” whereas other commodity interests use the terns “straddle.” A spread may be defined as the purchase of one future against the sale of another future of the same commodity or a different commodity in the same or different markets. CEA defines spreading only in terms of the same commodity, whereas exchanges define it to also include different but related commodities.
The term “spread” is also used to refer to the difference between the price of one future month and the price of another month of the same commodity.
Spur A track serving a customer.
Squeeze A manipulative attempt by one principal or company or a small group of traders to influence market prices in a certain direction by buying beyond a reasonable amount of contracts or stocks of a certain commodity.
ST Self trimming.
Standard Deviation Standard deviation is the measure that quantifies the amount of variation or dispersion of a set of data from its mean.
Statistics Canada Publishes information regarding seeded acres, inventory, etc., for crops grown in Canada.
STCC Standard Transportation Commodity Code which assigns a seven-digit number to describe commodities shipped by rail.
Stipulation of Compliance In commodity usage, formal assurance on the part of an individual or firm that an administrative request or order from CEA or other regulative body will be followed.
Stop Order or Stop Loss Order An order entered to buy or sell when the market reaches a specified point. A stop order to buy becomes a market order when the commodity sells (or is bid) at or above the stop price. A stop order to sell becomes a market order when the commodity sells (or is offered) at or below the stop price. The purpose of a stop loss is to limit losses or protect a profit.
Stop-Limit Order An order to buy or sell a commodity once the market price is at or above a specified price.
Stress Provides a forward looking and subjective estimation of market loss potential. In RMG two methods are used; correlated and additive stress.
Strike Price The fixed price at which the owner of an option can purchase (if a call), or sell (if a put), the underlying commodity; also referred to as exercise price.
Subsidy A sum of money offered by government to assist in the establishment or support of an enterprise or program which is considered to be in the public interest.
Supplements Feeds designed to be fed with other feeds to meet specific dietary needs of the animal (an example would be a pasture supplement).
Support In technical analysis, a price area where new buying will emerge to prevent further decline in the futures market price.
Swaps Switching one cash position for another same quantity, same price different position.
Sweating Accumulation of free moisture on the surface of the kernels.
Switch The liquidation of a position in one future of a commodity and the simultaneous reinstatement of such position in another fixture of the same commodity. It may be done “at market” or at a specified difference. When done by hedgers, this tactic is referred to as “rolling forward” the hedge.
Switching This is the service performed by a railroad to place cars at or remove cars from a facility. The initial switch is usually included in the line haul service. Additional switches will generate additional costs.
Switching (Reciprocal) At locations where multiple carriers are involved, one carrier will likely perform switching for others. This is done through long standing agreements which usually involve more than one market. These charges are reconciled between the carriers with little or no cost to the shipper or receiver.

T

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Target Price Used to calculate deficiency payments.
Tariff
  1. Rail grain rates apply equally to all shippers and are filed with the regulatory bodies in schedules called tariffs;
  2. A published schedule of charges for handling and storing grain for the account of others at licensed public grain terminal elevators;
  3. Established barge freight rates (per ton) for barge traffic from various origins to destinations such as the gulf of New Orleans, or other points.
TD ‘Tween deck. A deck horizontally dividing the inside of a vessel’s hold.
Technical Analysis An approach to forecasting commodity prices based on the study of price movement itself without regard to fundamental market factors.
Technical Rally (or Decline) A price movement resulting from conditions developing within the futures market itself and not dependent on outside supply and demand factors. These conditions would include changes in the open interest, volume, degree or recent price movement and approach of first notice day.
Temperature Cable Formed by combining several thermocouples at regular intervals with steel cables. Hung from the ceilings of grain storage facilities, these cables give operations personnel indication of grain temperatures to insure against condition loss.
Temperature System Used to monitor temperatures of grain in storage consists of thermocouples, readout instrument and switches.
Terminal Elevator A grain storage facility at one of the major centers of agricultural product marketing, such as Kansas City and Chicago.
Test Weight (TW) A factor in grading of grain. TW is the weight of the quantity of grain required to fill completely a Winchester bushel. Minimum pounds per bushel are established in the U.S. grain standards for the various numerical sample grades.
Thermocouples Device used to measure grain temperature, made from copper and constantan. The two metals produce a small amount of electrical voltage that is proportional to the temperature of the metal at their junction. By measuring the voltage and making the necessary conversions, the temperature at the junction is determined.
Theta The rate at which an option’s time value decays.
Example:
If the theta value is -$100 that means the value of the option will decline $100 per day, all else being equal.
Ticker Tape A stock or commodity quotation system.
Time Value Any amount by which an option premium exceeds the option’s intrinsic value.
To Arrive
  1. Price is based on delivery at the destination point and the seller pays the freight in shipping it to that point;
  2. Grain contracted for delivery to a designated destination which is either in transit or not yet shipped.
Track – Track Country Station Usually involves a price designation; indicates the cost of a given commodity loaded in rail car-and ready for shipment from an interior location.
Track Lease Leasing track from a railroad usually to spot or store a customer’s cars. The railroad may maintain the track at the lessee’s expense.
Trading Limit In virtually all North American commodity contact markets there is a maximum price change permitted for a single session. These limits vary in the different markets. After prices have advanced or declined to the permissible daily limits, the trading automatically ceases unless, of course, offers appear at the permissible upper trading limit or bids appear at the permissible lower limit.
Transfer To move grain from one location in an elevator to another, also called turning. Will blend off uneven areas, disperse hot spots, insect activity, dispel areas of high humidity and accumulated odors.
Transferable Notice or Delivery Notice A written announcement issued by a seller signifying his intention of making delivery in fulfillment of a futures contract. The recipient of the notice may make a sale of the future and transfer the notice within a specified time to another party, on some exchanges directly, and on others through the clearing association.
Transit Application of through-freight rates to a shipment stopped at a point intermediate to final destination for storage and/or milling and processing.
Translocation Movement of moisture through grain.
Trends The general direction of price movement, within a specified time interval.
Tripper A mechanical device for diverting the grain from a conveyor belt. Most trippers are mounted on tracks and can be moved along the length of the belt so that grain can be directed into any bin bolt, or spout over which they pass.
Turn Over Business A term used when you have filled all of your allocated space for a commodity and you’re forced to load/ sell what you are still buying across your truck dump. For example, you have 100 M corn space which is filled but yet you have 50 M still to be delivered. You would thus have to do 50 M bushels of turnover business.
Turnhead or Distributor Spout A moveable spout generally located beneath the scales in the headhouse. Directs the grain flow from the scales to various belts, bins or other spouts.

U

USDA United States Department of Agriculture, the governing body that regulates the Ag industry and sets policy in the U.S.
Undersupply A situation in which demand for a commodity exceeds physical stocks offered for sale in the market. Result is usually seen in rising prices. See Oversupply.
Unpriced Trades No flat price is established at the time of the trade - only basis level is agreed to by the buyer and seller.
US Origin Clause Contract term whereby the buyer/seller demand the grain is grown in the Continental U.S. This term is required for any government supported contract (EEP, GSM, CCC, etc.). During a USDA audit, these terms will be checked to insure the exporter is conforming to requirements.

V

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Value at Risk (VaR) VaR is a statistical measure of how much money a portfolio could lose over a given time horizon with a stated probability level.
Example:
If a portfolio has a 95% confidence VaR of $1m, then there is a 5% chance that the portfolio could experience a loss of more than $1m.
Variability The inherent risk and volatility portion of the price mechanism due to the supply fluctuations from year to year; it is peoples’ perceptions of the fluctuations that add to the variability.
Variation Margin Call A request for additional margin funds as collateral; occasioned by negative price movement against the held position.
Venture Capital Monies not needed for routine living expenses which are available for purposes of investing or speculating.
VaR Multiple VaR Multiple is the ratio of earnings to average risk deployed, as measured by VaR, over a certain time period (generally a year). VaR multiples are a tool that can be used to consistently compare trading performance to risk usage from one trader/portfolio to another.
VaR Multiple Formula:
Profits for the year/VaR.
Example
$45M YTD P/L; VaR $3M….$45M/$3M = 15x.
Vega The relationship between option price and volatility. The measurement of an option price change in with respect to a 1% increase (absolute move: f.e. 32% to 33%) in the volatility of the underlying asset.
Example:
The implied volatility on an option is 30% and the Vega is $100,000. If implied volatility increases to 31% the value of the option position will increase by $100,000.
Vernalization Winter wheat requires vernalization (exposure to a prolonged cold period during the seedling stage) to induce flowering.
Viscosity A measure of the resistance of fluids (gases or liquids) to flow. The coefficient of viscosity decreases with an increase in temperature for liquids and increases with an increase in temperature for gases.
Visible Supply The amount of a particular commodity in store at loading centers. In the grain markets, the total stock of grain in store, in public and some private elevators in the principal primary markets; plus certain stock afloat.
Volatility Volatility is the amount of uncertainty or risk about the size of changes in an asset's value. A higher volatility means that an asset's value can potentially be spread out over a larger range of values. This means that the price of the asset can change dramatically over a short time period in either direction. A lower volatility means that an asset’s value does not fluctuate dramatically, but changes in value at a steady pace over a period of time.
Example:
The standard deviation of price returns for corn over the past 30 days is 3% versus Wheat which is at 5%; informing us that wheat prices have been much more volatile (or have changed more dramatically) in comparison to corn.
Volume The number of purchases or sales of a commodity traded during a certain time period.
Volume of Trading The purchases and sales of a commodity during a specified period. Inasmuch as purchases equal sales, only one side is shown in published reports.

W

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Warehouse Receipt Document that guarantees the existence and availability of a certain quantity and quality of a commodity that is in storage; commonly used in ownership transfer for both cash and futures transactions.
Wash Sales Fictitious transactions contrived by two or more brokers in order to create a market price for a security or for tax evasion. It may also consist of two or more outside operators who match their orders for purchase and sale so that a seeming market activity is given to stock. Illegal and prohibited by law and by the exchanges. Tax law usually considers a repurchase within 30 days at a loss to be a wash sale. In commodity futures, contracts left open after the last day of trading may be settled by “wash sales in lieu of delivery.
Waybill A document prepared by the rail carrier at shipment origin showing origin, destination, route, consignor, consignee, shipment description and transportation charge. It is generally forwarded with shipment to the agent at destination and it is based on the bill of lading information.
Weights
Different kinds of official weights:
Origin Weights: This can be used when the shipper has all official scale and weighs the commodity prior to shipment.
Destination Weights: TWs can be used when the receiver has an official scale and weighs the commodity after the shipment has arrived.
Railroad Weights: These are commonly referred to as track scale weights (TSWs). This is used when the railroad weighs the car in route using a track scale. They then deduct the tare weight of the car to determine the weight of the commodity inside.
Tare Weights: The weight of an empty freight car.
In almost all instances the railroads require a minimum weight per carload to ensure the car gets fully loaded. If the actual weight exceeds the minimum, the actual weight applies.
Wire House Refers to a Commission House with branch office connected by telephone, teletype, telegraph or cable.
WTO World Trade Organization.
WWDSHEX/WWDSHINC Vessel load guarantee term. WWDSHEX stands for Weather Working days, Saturdays, Sundays, and Holidays excluded from the load guarantee. SHINC means Saturday/Sundays/Holidays included. Traditionally you want to buy SHINC and sell SHEX.

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