About 80% of Montana is in a severe or extreme drought and its continuation could make 2022 the state’s second consecutive year of reduced grain production.
Amid these conditions, United Grain Corp. (UGC) is offering its producers its new Profit Partner Protection Plus contract, an agreement where producers who lose their entire crop yield to drought can be released from obligations to deliver grain.
“Our efforts to bring high-quality grains to overseas customers depend on the products of our producers, and their cultivating relies on ideal growing conditions,” said UGC Hedge Desk Manager Rob Froom.
“This year’s drought has made growing difficult for many of our producers, so we are pleased to offer them a contract that will reduce pressure if it prevents them from producing anything.”
Producers impacted deeply by western drought
UGC feeds the world by connecting producers in the northern U.S. with global buyers in the Asia-Pacific region, but last year saw some of UGC’s producers in eastern Montana, North Dakota and Minnesota unable to deliver any grain due to drought.
To provide security for its producers should they experience this in the future, UGC formulated the Profit Partner Protection Plus contract.
This agreement provides producers with a less risky contract through which they can set a price floor in the futures market and not have to worry about Mother Nature cooperating.
In the event of a crop failure, producers could potentially be out the cost of their price floor but the obligation to deliver their contracted grain is canceled.
Contract protects against other natural events
In addition to drought, UGC’s Profit Partner Protection Plus contract also applies if entire crop yields are destroyed by natural events from hailstorms to insect infestations.
“UGC is dedicated to feeding the world safely and we recognize the challenges that our producers go through to help us achieve that goal,” said Froom.
“With our Profit Partner Protection Plus contract, producers can make it through this difficult growing period without worrying about delivering should they lose all their crops.”