lO—Lancaslor Farming.
• Commodity
t Continued iiom I’age i)
Hedging
liedm; is .1 pi elective pio
coduie designed to mmuni/e the
farmei's production losses that
tire due to advcise price fluctua
tions During the va: 1011 s stages
of the ordinary giovvmg or fat
tening period someone must as
sume the possibility of loss that
unavoidably accompanies the
owneiship of the physical com
modity This possibility is ever
present as long as the farmer
owns his commodity
The price of a commodity for
future delivery - (futuies con
tracts) usually tends to fluctuate
in parallel patterns with the
same commodity that is being
produced by the farmer So. he
can become “hedged" by selling
futures in amounts equivalent to
his inventory ot the same com
modity in its actual physical
form This is the most common
form of hedging
The term hedging, as it applies
to any commodity which has the
benefit of futures hading, means
the taking of such act.on as will
jesult in offsetting possible loss
es in hansactions previously
made 01 about to be entered up
on Actually, when expiessed in
teims of action, it involves one
cl the following
di The sale of one 01 more
futures contracts to eliminate or
Jessen the possible decline in
value ol owneiship of an approx
imately equal amount of the ac
tual commodity This is called a
‘ short” hedge
(2) The purchase of one or
tnore futures contracts to elimi
nate or lessen loss from the pos
sible advance m the value of the
.actual commodity not yet owned,
and needed to fill processing or
other commitments at set prices.
This is a ‘ long” hedge
Here is how it works Let’s as
sume Tom Jones has a full corn
crib and an empty pen for finish
ing steers Does Jones immedia
tely go to the feeder cattle mar
ket and buy steers at whatever
price is asked to pay on this
particular day he happened to
get the urge to buy’ He may It
is his money he is spending
But Reed suggests befoie he
jumps into the pick-up tiuck and
fl\ s to the market, he take a mo-
This yeai a new alfalfa oichaid
giass combination has been add
ed to the line-up of Hoffman
Foimulas “Top-Potential”
Foimula Also ‘Foimuld 69’
Biand Timothy and Foimula
70 Biand Red Clo\ei new
multi-vauetj blends, have been
de\ eloped
All 15 Hoffman Foimulas are
designed to meet specific hay,
pasture and grass silage needs
All offei bioader protection
o\er a wider range of disease
and adaptation pioblems
f 1
■ Sled'S pasture,
■I I tj OATS, FORAGE
SPECIALIZING
IN ALFALFA,
CLOVER,
Saturday. Nov ember 8,19(19
mont. look at what the futures
quotation Is piedicting the puce
to be for cattle in the month his
steers will be ready for the fat
cattle market Jones could find
that information on the market
pages of Lancaster Farming, of
course He will see, if he looked
last week, that Chicago cattle
futuies for the month of April
aie quoted at 29 10
This gives Jones an idea of
what the people who have watch
eci the market and its trends
every day for many yeais believ
es steers will be worth in April.
“No other businessman will go
out and buy in when he has no
idea what his product is going to
sell for when it is ready for mar-
WHY RE-TIE
ANOTHER BALE?
The twine with the extra
high knot strength
_ EXTRA
■mrj HOLLAND
■ft X-900 : niirn
BALER
i7~~- / ; TWINE
• the ball with the wooden plug
• 9,600’ and 10,000’
Made from No. 1 East African fiber
The finest available
ORDER NOW & PAY NEXT YEAR
I—II
SMOKETOWN Phone Lane. 397-3539
kct, ’ hood paid "So why should
the fame!; do that.”
After Jones sees the future
quotations, he figuics how much
it will cost him to feed the cat
tle and how much profit he is
satisfied to icceive. When he has
this total, he slowly steps into
the pick-up truck and duves to
the market with a figuic in his
head that would be reasonable
to pay for feeder steers. If the
feeders can’t be bought to make
a reasonable profit, they should
not be bought at all.
In our example, Jones buys
steers, and has them tracked to
his feed lot the same day.
Now, is Jones’ worry about
over? Well, not quite. Since he
figured a profit into his steers
before he bought them, his wor-
ries would be over if he knew
the price was not going to go
down. But sometimes it docs, so
here is where the farmer can
use the futures. *
If he is truly sure that the pro
fit figured at the current futures
quotation will be satisfactory, he
can sell his steers on papei the
same day he buys them by sell
ing a futures contract through a
broker.
The Futures Contract
The mechanics of commodity
futures trading are easier to
grasp when you understand the
futures contract. It is called a
futures contract because it re
quires delivery of a commodity
THIS FARMER is on bis way
to the bank •••
How did he make this‘profit? Well, to start with, he
bought good steers; then fed Red Rose Cattle Sup
plement mixed with his grains. He provided the
steers with a ration that produced fast gains and
he was able to get his steers to market . . . early.
You. too, can earn more money from your steers
if you feed Red Rose 32, Red Rose 50 Beef CatKe
Supplement, or Red Rose Steer Feed.
If you're anxious to make better profit whj. do* 't
jou let us explain our feeding program to you?
Red Rose
CATTLE FEEDS
Walter Binkley & Son
Lititz -
Brown & Rea, Inc.
Atglen
Eiverson Supply Co.
Eh eison
Henry E. Garber
R D 1, Elizabethtown, Pa,
L. T. Geib Estate
Manheim
I. B. Graybili & Son
Refton Stiasburg
E. Musser Heisey & Son
R D =2 Jit Joy, Pa
Heistand Bros.
Elizabethtown
Red Rose Farm
Service, Inc.
N Chinch St Quanyville
in a stated mqnlh m the fating**-
if not liquidat6tf‘before ‘he con
tract reaches maluhtj
The rules and b\ -lan - of the
commodity exchange, where the
trade takes place, is an implied
part of each transaction
Tiading on the futuies mar
kets is fast and smooth because
every futures contract foi a spe
cific commodity is identical as to
quantity and quality provisions.
Thus, as far as the futures trad
er is concerned “wheat is wheat”
and “beef is beef” Eveiv live
cattle contract is for 40,000
pounds of choice grade steers
and every wheat contract is for
(Continued on Page U)
. . . to deposit the
money he made w hem
he sold his steers.
David B. H urst
Bowmansuhc
Martin's Feed Mi4l, Inc.
R D 3, Eplnata Pa
MountviUe Feed Service
MounU xlle
Musser Farms, Inc.
Columbia
Musser's Mfll
The Buck
Chas. E. Sauder & Sons
Teire Hill
Ammon E. Shelly
Lititz
E. P. Spotts, Inc.
Honej Biook
H. M. Stauffer & Sons,
Inc.
Witmer