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From a farmer's point of view, futures can allow for relatively cheap insurance against the agricultural product's price moving against you. You're basically ne
by yccs27 2y ago
From a farmer's point of view, futures can allow for relatively cheap insurance against the agricultural product's price moving against you. You're basically negotiating the price of the product before it's ready to sell, with a standardized product on a global marketplace.
- zer00eyz 2y agoAgain... Not just price Payment date can be decoupled from delivery date... So it can be a "loan" as well. As a producer you're betting on yield. If you expected 140 bushels an acre and got 130 your on the hook for the rest. Regardless of price on thee market ... even if its 10x what you were paid. SO your negotiating VOLUME on a product you haven't made yet, and could have a shortfall of. There is a whole set of quality issues with the product as well... Too wet, to dry, wrong type, misses the mark on grading... You can sell options on futures... some smaller amount of money today and agree to sell at a price at a later date, maybe... if the actual price is lower than your offer price then you get the money and the crop. There is more to the futures market than HN learned from the Duke Brothers.