Hedge Futures

Settlement and Maintenance of Hedge Future Contracts and Accounts

All grain businesses hedge their grain purchases and sales. The user needs a way to maintain the contract detail and maintain the futures account that is kept at the broker office. There is also a need to recognize the gains/losses from the hedging process and record this for income statement purposes. To accomplish this:

Set up a Name ID for each futures trading account in the Name and Address Package (differentiate these Name ID's by creating a unique name ID type for futures brokers)
Create a bank account for each futures trading account
Define a contract type (usually HF - Hedge/Futures) in GRN for your futures contracts
Enter each futures trade (Purchase or Sale) for the appropriate month, market, bushels, and price as a HF - Hedge/Futues contract. Remember to post the futures price in both the scheduled price and the futures price fields. (Scheduled price = Futures +/- basis, and basis = zero)
As offsetting trades are made, post these HF Contracts
When the broker's statement arrives, (you need the specific contracts settled and broker's fees), go to Cancel Contracts and cancel the appropriate bushels from both the Purchase and Sale. Select the Purchase Contract you wish to cancel and enter the bushels you wish to cancel. The futures price must be moved to the price field on the contract that is being canceled. At the question, Produce Delivery Sheet? Answer Y. Process the Sales Contract in the same manner. This step may be done on the day of the trade if appropriate info is known.
Now go to Settlements (2), Produce a Settlement (2). Enter P for Purchase and enter the Name ID and Commodity you just canceled. Then select final settlement.
On the second screen, blank out the P in Purchase/Sales contract (this will allow you to settle both the purchase and sale on one settlement)
On the third screen, select the delivery sheets you wish to settle
From the settlement screen, add a discount for the brokerage fees
If the settlement is a gain post a cash receipt to the bank code created for this futures account
If the settlement is a loss, create a check (print it to the screen) using a control document number for the net loss from the bank code for this futures account
If you want futures purchase and sale settlements to be posted to a separate G/L account, set up the accounts you need in the Chart of Accounts in General Ledger. Go into SJI, System Accounts, Commodity Accounting and using the name ID type as your source code to run the settlements to the accounts that you created in the general ledger
By following these procedures, the bank account subsidiary should always reflect the cash balance of the futures account, and the Hedge Position Report will always reflect the correct futures position

Edited:SMW