3 ms·

I'm not aware of these instruments. What are some examples of hedges to farm borrowing so I can look them up?

by NTDF9 8y ago

icahnvalyou 8y ago
All the commodities mentioned in the article have had active futures markets for decades. A farmer will typically sell contracts to deliver their crop as a hedge against the price moving against them during the season. https://en.wikipedia.org/wiki/Futures_contract https://en.wikipedia.org/wiki/Futures_contract
protomyth 8y ago
Go to any of the major player's sites and they have programs for farmers such as https://www.cargillag.com/ https://www.cargillag.com/ - ProPricing is there marketing name https://www.cargillpropricing.com/ https://www.cargillpropricing.com/ You can do it yourself if you learn hedging. Iowa State has https://www.extension.iastate.edu/agdm/crops/html/a2-60.html https://www.extension.iastate.edu/agdm/crops/html/a2-60.html and University of Missouri https://extension2.missouri.edu/g602 https://extension2.missouri.edu/g602
village-idiot 8y ago
Most farmers and their direct consumers will buy/sell a portion of their harvest in advance in the form of commodity grain futures. This protects the farmer from dropping prices and their consumer from rising prices. It's one of the reasons why prices don't shift around a ton from winter to summer anymore. You can also hedge risk against changes in production cost by using instruments that track the difference between raw grains and their immediate products (e.g. Soybean Crush). But that's not really a game the farmer might play. These systems have their limits, and are really there to protect all parties against sudden shifts caused by external events like drought and international trade. When the trend is long and smooth in one direction there's very little the farmer can do to fix their situation via purely financial means. No baker is going to pre-purchase their wheat at old prices when the market price has been slowly declining for a decade.
lbotos 8y ago
If you want to read more, "The Futures" was solid intro to the "how" it started: https://www.amazon.com/Futures-Speculator-Origins-Biggest-Markets/dp/0465018432 https://www.amazon.com/Futures-Speculator-Origins-Biggest-Ma... (no affiliate link)

I'm not aware of these instruments. What are some examples of hedges to farm borrowing so I can look them up?

by NTDF9 8y ago

I'm not aware of these instruments. What are some examples of hedges to farm borrowing so I can look them up?

All the commodities mentioned in the article have had active futures markets for decades. A farmer will typically sell contracts to deliver their crop as a hedge against the price moving against them during the season. https://en.wikipedia.org/wiki/Futures_contract https://en.wikipedia.org/wiki/Futures_contract

protomyth 8y ago

Go to any of the major player's sites and they have programs for farmers such as https://www.cargillag.com/ https://www.cargillag.com/ - ProPricing is there marketing name https://www.cargillpropricing.com/ https://www.cargillpropricing.com/ You can do it yourself if you learn hedging. Iowa State has https://www.extension.iastate.edu/agdm/crops/html/a2-60.html https://www.extension.iastate.edu/agdm/crops/html/a2-60.html and University of Missouri https://extension2.missouri.edu/g602 https://extension2.missouri.edu/g602

village-idiot 8y ago

Most farmers and their direct consumers will buy/sell a portion of their harvest in advance in the form of commodity grain futures. This protects the farmer from dropping prices and their consumer from rising prices. It's one of the reasons why prices don't shift around a ton from winter to summer anymore. You can also hedge risk against changes in production cost by using instruments that track the difference between raw grains and their immediate products (e.g. Soybean Crush). But that's not really a game the farmer might play. These systems have their limits, and are really there to protect all parties against sudden shifts caused by external events like drought and international trade. When the trend is long and smooth in one direction there's very little the farmer can do to fix their situation via purely financial means. No baker is going to pre-purchase their wheat at old prices when the market price has been slowly declining for a decade.

lbotos 8y ago

If you want to read more, "The Futures" was solid intro to the "how" it started: https://www.amazon.com/Futures-Speculator-Origins-Biggest-Markets/dp/0465018432 https://www.amazon.com/Futures-Speculator-Origins-Biggest-Ma... (no affiliate link)