Add it up before the next call, or the answer is a guess. A forward contract with the cooperative, a slice committed against an input bill, a futures position the broker follows, and a conversation nobody wrote down: most farms cannot say in one sentence what share of this cycle’s production already carries a price. The number exists. It is spread across four places, and whoever answers the buyer on Tuesday morning has none of them on the desk.
Partial coverage is the normal state, and that is precisely why the sheet has to exist. Among United States farms surveyed in 2016 by the country’s Department of Agriculture, only 6 percent of corn farms and 8 percent of soybean farms that used futures had hedged all their production, while those that used futures at all covered 41 percent of their corn and 47 percent of their soybeans. Whoever holds a position holds a partial one. A partial position nobody has written down is not a position, it is an impression, and an impression is what gets committed twice.
Why the answer is never one instrument
Because the commitments arrive one at a time, from different counters. The same United States survey found that farms use each instrument as part of a portfolio of risk management tools, and that those who use marketing contracts are much more likely to also use futures and options than those who do not. Rather than choosing one channel and staying there, a farm accumulates commitments through whichever door opened first.
A sheet organized by instrument inherits that mess and hides rows. The barter deal that traded fertilizer for grain is a priced commitment. So is the tonnage promised to a cooperative on a handshake that was later confirmed by email. Tonnage delivered into a co-op pool is a third case, and it is the one most often left off, because the farm files it in a co-op membership record rather than under selling. The unit of the sheet is the commitment, not the instrument, and it is the only unit under which the rows add up to a single number.
Which fields does a commitment already have to carry?
The same ones, in every market that has bothered to write them down. The United States Department of Agriculture defines a marketing contract as one that sets a market outlet, a quantity to be delivered, and a price or a pricing formula, with the farmer still owning the crop and still making the production decisions. Studying Italian arable farms, Penone, Giampietri and Trestini reach for the same definition and use it unchanged, a written agreement between producer and buyer that defines a price for a specified quality and quantity of a commodity before the marketing, which they take from a 1999 report by the same United States Department of Agriculture rather than derive from their own farms.
Brazil put the list into federal law: for the Cédula de Produto Rural, article 3 of Lei nº 8.929 of 1994 requires the delivery or maturity date, the plain promise to deliver the product with its quality and quantity specifications, the place and conditions of delivery, the date and place of issue, and the name and signature of the issuer.
One field list, and it stops at no one border. That is the argument for the seven columns below: they are not a Rurivia invention, they are what an agriculture department and a national legislature each decided a commitment has to say before it means anything, and what a European research group could pick up unchanged to study farms in a third market.
| Column | What it has to answer | Where the field is already demanded |
|---|---|---|
| Product | Which crop, class or category this commitment is against | Quality specifications, Brazilian law, article 3 |
| Volume | How much was committed | Quantity to be delivered, United States definition |
| Unit | Tonnes, bushels, head, kilograms, whichever the contract uses | Quantity specifications, Brazilian law, article 3 |
| Price or pricing formula | The price, or the rule that will produce it later | Price or pricing formula, United States definition |
| Date agreed | The day the farm became committed | Date and place of issue, Brazilian law, article 3 |
| Delivery or settlement date | The day it comes due | Delivery or maturity date, Brazilian law, article 3 |
| Who signed | The name of the person who committed the farm | Name and signature of the issuer, Brazilian law, article 3 |
Is a committed tonne a priced tonne?
Often it is not, and this is the column that decides whether the sheet is worth anything. In Argentina, the Bolsa de Comercio de Rosario mapped five commercial cycles of wheat and found that among forward contracts, the ones with deferred delivery, 29 percent were negotiated with the price still to be fixed, against 64 percent closed at a price already agreed. The volume was committed. The price was not. Those are two different states of the same tonne, and a sheet with one column for both cannot tell them apart.
The reference is the second half of that problem. Of those Argentine contracts left to fix, 47 percent named the daily quotation published by the national grain arbitration chambers, 9 percent the buyer’s own market and 2 percent the futures market, while the remaining 42 percent recorded no reference at all , a gap the exchange flags itself, because it clouds the count it is making. A row whose formula names no reference is an open position wearing a contract’s clothes, and it will be counted as priced by everyone who looks at the folder quickly.
Brazilian law treats the same field as a requirement rather than a detail: a Cédula de Produto Rural settled financially has to state in its own body the price agreed between the parties and, where applicable, the index, the institution responsible for calculating or publishing it, and the market where the price is formed. Two columns, then, or one column with two states. Priced, and committed but not yet priced.
What is the subtraction for?
For the number nobody has: the volume still open. Add the volume column, write expected production underneath it, and subtract. Do it twice, because the two states of the previous section give two different answers: expected production minus every committed row is the volume nobody has claimed yet, and expected production minus only the rows that carry a fixed price is the volume that still has to find one.
The second number is the larger of the two whenever a single row is committed with the price left to fix, and it is the one the question at the top of this page is asking about. Expected production is not a fresh estimate invented for this sheet. It comes from a multi-year production plan, and if the two pages disagree the open volume is wrong before anybody has argued about the market.
The open volume is also what makes intention checkable. A written selling plan states what share the farm meant to have priced by this point in the cycle; this sheet states what share is priced. One is a standard set in advance, the other is the count, and the gap between them is a fact rather than a mood.
Getting the subtraction wrong costs in one specific direction. The United States report lists, among the disadvantages of a marketing contract, that the contracted quantity must be delivered, which leaves the grower open to costly yield risk. Commit more than the farm delivers and the shortfall has to be bought at whatever the market asks on the day. The sheet also makes a second failure visible for the first time: any row priced below the break-even price is a loss already contracted, and it will not improve by being ignored until delivery.
Why does the sheet say nothing about what to sign next?
Because the evidence does not support telling you. Every piece in the marketing axis, which in farm English names the selling of production and not the advertising of it, stops at the same line: it describes what to write down, never what to sign. Dhakal and Janzen looked at Illinois grain farms with financial records held by the state farm business association and found that about 15 percent had an active futures brokerage account, then compared what the two groups actually received.
The average prices received were not distinguishable between them and the range of outcomes was roughly similar; farms with an account came out slightly ahead in years when prices fell and slightly behind in years when they rose, and the authors call both gaps marginal. Those are Illinois farms that keep books with an association by choice, which describes record-keepers rather than every farm in the state, and account ownership is not the same as having used the account. The reading survives that.
The same records show account ownership rising with sales, and in the largest bracket it still stayed below half, which the authors state plainly: in every size group, most farms had no account. Read it as a description of who adopted, never as a description of who needs the sheet. The sheet is one page, its cost does not move with the tonnage on it, and a farm with three commitments has less room to lose sight of one than a farm with thirty and somebody employed to check them.
How wide is the range the open volume is sitting in?
Wider than it feels, and that is the honest reason to know the open number rather than sense it. Cruz Júnior, Irwin, Marques, Martines Filho and Bacchi surveyed 90 corn producers in southern and central-western Brazil in October and November of 2008, asking each one what he expected prices to do. Of the 81 producers whose answers could be compared with the futures market, 62 expected a narrower price range than the market had actually produced; measured against the price history of their own regions rather than against the futures market, the same test caught 44 percent of them. They were confident about a spread the market had never respected.
Hold that finding where it belongs. It is 90 producers who agreed to answer, reached as clients of a consulting firm, as members of a farm economics institute in Mato Grosso, or through a state university in Goiás, which is a group that volunteered rather than a draw of farms, so the size of the gap belongs to those two months of 2008 and not to next year. What travels is the shape: the volume left open is exposed to a range wider than the person carrying it expects, and the first defense against that is knowing how many tonnes are in it.
Who can sign the next one?
One named person, up to a stated volume, and this is the line that turns a record into control. Brazilian law will not let the point be dodged: it names who is entitled to issue the cédula and demands the issuer’s name and signature on it. The pressure to add another commitment comes from outside. Among the Italian farms studied by Penone, Giampietri and Trestini, encouragement from the buyer was associated with the intention to enter a marketing contract, alongside the farm owner’s own leaning towards the instrument, from an online survey of 84 arable producers who volunteered to answer.
The buyer calls whoever picks up. Write the authority line at the foot of the sheet: this person may commit up to this volume without consulting anyone, and beyond it a second name signs. That is the same field that belongs in the written job description, which is where control stops being a diagram in farm management and becomes a name with a limit. Those same Italian producers reported doubts about the buyer honoring the contract, which is worth a column of its own the day a counterparty fails, and worth nothing at all if the row was never written.
Where to start
An hour and a half, with the contracts and the brokerage statements on the table. Nothing new is decided here. All of it has already happened, and it has simply never been in one place.
A commitment on this sheet is not a sale. It becomes one on the day the product moves and the money settles, which is when the row leaves here and enters the sales against the plan. Until then it is an obligation the farm carries, and the reason it belongs on a page instead of in somebody’s head is that obligations do not announce themselves. They are remembered when a buyer calls to confirm delivery, which is the worst possible moment to find out that two people sold the same tonne, or that nobody did.