A3t—Lancaster Famine, Saturday, May 31,1980
NEWARK, Del. - Selling
part of a growing cr stored
crop via a hedge in the
futures market can give
tenners greater flexibility
than any other marketing
alternative. The flexibility
comes from being aide to
change a contracted position
if a wrong decision is made.
Other forms of selling
grain don’t provide this kind
of flexibility. But you need to
have a clear understanding
of bow the system works in
order to benefit from it, says
University of Delaware
crape marketing specialist
Carl German.
When used properly,
hedging has several ad
vantages as a marketing tool
for grain fanners. For one
How
LANCASTER
matter where farmers are
growingcom, they probably
have one of the two toughest
weeds that annually attack
the crop-sometixnes both.
In a survey of 2200 county
agricultural extension
agents in 23 corn-growing
states last year, quackgrass
emerged as the number one
weed problem in terms of
acres infested.
The tenacity of this
perennial weed, which
reproduces by seeds and
long rhizome systems, is
legendary among corn
growers. According to
survey response,
quackgrass was found to
contaminate more than 11.5
million acres, mainly in the
northern and northeastern
com-growing areas.
According to the same
survey, johnsongrass infests
fewer acres than quackgrass
-about 4.smilljon acres. But
in the southern and
southeastern region of the
country where it is widely
found, johnsongrass is
regarded as the most severe
weed pest in terms of yield
losses.
More recent reports in
dicate the weed is moving
northward through Penn
sylvania, Indiana, and
Illinois and has been
detected as far north at New
York.
The traditional method of
controlling quackgrass is to
grow corn on infested
acreage for three years
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Avoid these common errors
when
thing, you may be able to
realize a higher price for
your crop than you’d get by
simply selling it on the cash
market.
This is largely due to the
fact that this way you are
spreading sales over the
course of a year, using a
combination of cash and
futures markets, instead of
selling only once or twice a
year in the cash market.
It’s extremely important
to remember just why you’re
hedging, warns German.
For a farmer, this sytem
serves primarily as a way to
protect yourself from an
adverse price change. In the
case of a growing or stored
crop, hedging can be
to beat two tough weeds
using high rates of atrazine
herbicide.
But atrazine carryover
can tie the hands of farmers
wishing to rotate portions of
their corn acreage to other
crops as a market hedge.
These growers will require
a chemical treatment such
as Eradicane, that will
control quackgrass the first
year in com and still
degrade sufficiently to allow
rotating to an alternate crop
the following year.
Although in terms of acres
infested johnsongrass may
not be as widespread, it is a
greater problem in that it is
harder to control.
No
Like quackgrass, its
northern counterpart,
johnsongrass reproduced by
rhizomes and seeds.
The plant, nicknamed
“bankruptcy” grass by old
timers who have seen
numerous fields abandoned
because of choking in
festations, produces 200 or so
seeds per head and an
estimated 100 to 350
rhizomes nodes, each with
the capacity to produce
another johnsongrass plant.
Although instructions
concerning herbicide rates
and application techniques
will differ for various soil
types and geographical
regions, growers should
follow closely these cultural
practices in their john
songrass and quackgrass
control programs;
-Plow heavy stands with
using futures markets
protection against a price
decline.
If you’re not interested in
foregoing some of the risk
involved in pricing your
crop, you don’t need to
hedge. Instead, you should
concentrate on cash grain
sales and forward cash grain
sales.
Hedging alone won’t
guarantee a higher return on
your crop. In most years,
notes the specialist, it takes
effective ose of all three
marketing options
hedging, cash grain sales
and forward cash grain sales
to get that higher average
price. But hedging will help
even out the highs and lows
involved in pricing a com
modity.
moldboards or chisels, in the
fall when possible.
-Disc deeply to chop up
rhizomes into small pieces.
-Disc herbicide into the
soil just before com plan
ting. For extended broadleaf
weed control, tank mix
Eradicane with atrazine or,
to avoid carryover
Anaplasmosis topic of
meeting in
GETTYSBURG - The
concern of local cattlemen
has prompted a special
meeting on Thursday, June
5, 8 p.m., at the old Cour
thouse in Gettysburg, for
dairy, sheep, and beef
producers in Adams County.
The topic they will be
hearing about is
anaplasmosis, a current
problem.
William Herberley, of Fort
Dodge Laboratories, will
present a movie and slides
on the disease.
Nest on the agenda will be
William High, VMD, ex
plaining what the Penn
sylvania Department of
Agriculture is doing about
the problem.
Local veterinarian Ralph
Jackson will join the two
speakers in a panel
discussion.
20
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German says'his analysis
of the various alternatives
for marketing grain show
that hedging really pays in
the years when windfall
price declines occur, as they
did in 1979-1980 with
soybeans.
hi these years, a tenner
can increase the average
price he gets for his crop by
hedging a part of it.
On the other band, in years
when price increases occur
during the time a hedge is
placed, a fanner is likely to
realize a somewhat lower
average price by hedging.
The decision whether or
, not to hedge depends first of
all on the amount of risk a
probleins, with Bladex.
-Plant when the soil is
warm, so com sprouts fast
and shades out late weed
germination.
-Cultivate com or follow
with a postemergence spray,
such as 2,4-D or Banvel
herbicides, to get escaping
broadleaf weeds.
Adams Co.
Anaplasmosis is a disease
nf ruminant animals that has
been diagnosed in Adams
County. The disease is
characterized by anemia
and depression, and it is
fatal in 25 to 60 percent of the
cases.
“In an effort to better
understand the disease, how
it spreads, and course of
action, we have planned this
meeting for area farmers,”
said John Schwartz, Adams
County Agriculture County
Agent.
HSi
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farmer is willing ~ and able
to accept A hedge is
successful when you are able
to achieve the target price
you set before placing tint
hedge. If you achieve this, it
doesn’t matter which way
price movement on that
commodity goes.
Before any farmer can use
hedging successfully, he
must have a fairly accurate
estimate of his production
costs and local basis.
Knowing historical basis
patterns the difference
between a futures price and
a local cash price • doesn’t
guarantee a successful
hedge. But knowledge of the
basis does help make in
formed decisions.
Also, unless you’re basing
your decisions on your ac
tual production costs, you’re
not really hedging.
One common mistake
fanners make in futures
trading is to calculate
inaccurately their local
basis. This involves failing to
add the right basis, or to
subtract it from the right
delivery month.
Storable commodities
don’t present much of a
problem when this happens,
but for non-storable com
modities, you must use the
delivery month closest to the
time your crop will be ready
for market.
Another common error is
failure to relate to futures
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transaction to the size of
your farm business. Any
trading done in excess of
expected production
overcontracting —is
speculation. This just isn’t
the purpose of hedging, says
German.
When you contract for
more' than your produce,
you’re actually increasing
the risk involved in pricing
the conuhodity, rather than
decreasing your pricing risk.
Other mistakes fanners
sometimes make in futures
trading include: leaving
marketing decisions go to
the last minute; not un
derstanding the terms of the
contract; marketing a crop
without computing a target
or selling price and using
this as your price objective;
and locking in a loss.
Any one of these mistakes
can turn a marketing'
decision into arumprofitable
venture. Most ofthem can be
avoided by working closely
with knowledgeable people.
With experience you’ll learn
to avoid other errors.
The best way to sell your
grain successfully is to learn
how to make better use of
your marketing alter
natives. By combining all
three hedging, cash grain
sales, and forward cash
grain prices in a well
planned program, you
should realize a better
return on your crop.