Hedge to Arrive Contract Law and Legal Definition

Hedge to arrive contract is a contract used in futures trading where the futures price is determined when the contract is created, but the basis level is not determined until later, usually just before delivery.

The following is an example of a case law referring to hedge to arrive contract:

A standard hedge-to-arrive contract is a forward contract in which the farmer promises to deliver a stated quantity of grain for a price linked to the price of a futures contract that expires in the delivery month. From the farmer's perspective, such a contract is a normal forward contract that shifts to the buyer the risk that the market price will fall before delivery (and simultaneously prevents the farmer from taking advantage of rising prices). From the buyer's perspective, the HTA contract facilitates hedging. [Nagel v. ADM Investor Servs., 1999 U.S. Dist. LEXIS 12438 (N.D. Ill. Aug. 5, 1999)].