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In the above, note the ZSU23 ‘Hedge Balances’ position has gone from +2000 to -2000. Before the second transaction, the elevator was long 2000 cash. With the additional 1000 bushels of cash transacted, a ZSU23 futures contract was sold and the offsetting 5000 bushels (futures underling) are taken into account (3000 bushels cash - 5000 bushels future).
Example 5: Additional Tail Balance
When a producer sells cash grain to the elevator in excess of the futures hedge threshold, the elevator is left ‘long’ the excess cash. For example, the elevator takes in 6,000 bushels of wheat, so an additional unhedged bushel of 1,0000 cash is left on the balance as the one lot of futures for 5,000 bushels does not hedge the order on a 1:1 ratio. Below, a producer sells 6,0000 bushels on the ‘Jan 2024’ through the bid. Both the cash and futures hedge transactions are viewable in the orders panel. The Hedge Balances panel updates with the filled 6000 cash order in addition to the 1000 ‘tail’ leftover from the futures hedge. The Hedge Balances Details windows also populates with the cash, futures and unhedged tail details.
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Below, the ZSF24 Hedge Balance account is now +1000 bushels as the elevator’s position is long 1000 bushels of cash that was not covered by the futures hedge executed to offset the cash position.
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