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Provisional contracts are basis sales contracts normally one month at a time that has a basis price and a Provisional (temporary) price for the Futures price. With the provisional price set, a cash price is used to invoice the entity when the loads are scaled out. At the end of the month, an average daily price for the Futures price is determined for the entire month. That Futures price replaces the provisional price and the difference is then invoiced to the entity. Typically, provisional contracts are used for selling ethanol.
Example:
Ethanol sales contract is created with a basis of .25/gal and a provisional price of $5.00 which then would have a $5.25/gal price to invoice the entity. At the end of the month, 10 loads have left the plant over the entire month. The Futures price has been determined to be $5.30 and the contract sequence for the futures will have 5.30 with a Cash Price of $5.55. An invoice will be created for the entity for the 10 loads at .30/gal (cash price 5.55 - 5.25 with provisional price).
{color:#333333}There will be a Provisional checkbox and once it is checked it will change the sequence fields for Futues Price to Prov Futures Price and Cash Price to Prov Cash Price.{color}
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