Lets assume a Farm commits to delivering XX/bushels of Corn on a Futures Contact. When that delivery date comes and the farm can't meet it (lets assume their whole farm burned down), what happens? Is the farmer fined? do they have to pay up for the missing corn?|||Most futures contracts are done by cash settlements these days. ie you promised to deliver a certain commodity at a certain price and the value of the commodity increases drammatically. Instead of actually delivering the commodity you just pay the difference between the current price of it and the price the buyer has the right to pay. In other words, the investor gets his profit electronically without having to receive the commodity.|||They have a contract. If they can't deliver they have breached the contract and can be sued for damages.
I have always dreamed of a buyer defaulting, and some farmer driving a herd of hogs or steers throught the doors of the Chicago Futures Exchange to deliver on the contract.|||If it is beyond their control then nothing. ex. fire etc this cancels contract
If it is within their control ex. over sold, bad crop then the holder of the futures contract can purchase from elsewhere and sue the farmer for what he payed above the original futures contract price.|||Normally they will have posted collateral to protect against this, but they have to pay. The farmer can buy the corn on the market and deliver that in fulfillment of their contract.|||Crop insurance
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