farming’s futures By David K. Sauder Commodity Advisor Trade Tech, Lancaster Here are several questions fanners ask about the futures market. How do cash prices differ from futures prices? Futures prices are quotes for delivering a designated quality of gram at a specific place at a specific tune. The delivery place (or places) is set forth in the rules governing the futures contract. The delivery time consists of certain designated days All-Season" by JAMESWAY® Fresh idea More than just a fan, All-Season ventilation gives you control of the air in your buildings. Set it, then it’s automatic. Controls drafts, dead air pockets and condensation. Air stays fresh. Reduces stress; helps livestock improve production. See us for systems and service that help make the good life better. AGRI EQUIPMENT INC. 2754 Creek Hill Rd Leola, PA 17540 717-656-4151 I. G. SALES Rt. 113, Box 200 Silverdale, PA 215-257-5135 G. HIRAM BUCHMAN, INC. Rte 519-N‘otf Rte. 46 P O Box 185 Beividere, NJ 07823 201-475-2185 during the delivery month. It follows that gram delivered to a different place or at a different tune is likely to have a different price. Such differences do, in fact, exist and are due primarily to transportation and storage costs. The number of pnce possibilities is practically unlimited. For example, m a locality that nor mally ships its gram to buyers in Chicago, the cash price of com in January is likely to be below the ventilation DEPENDABLE MOTORS Honey Brook, PA 215-273-3131 215-273-3737 HENRV q LAPP SOLLENBERGER SILOS ntraici a. UHrr rfD2, Chambersburg, PA RDI, Cams, Gap, PA 17527 717-264-9588 717-442-8134 HARRY L. TROOP Rt. 1 Cochranvitle, PA 19330 215-593-6731 GEORGE A. COLEMAN BENNETT MACHINE CO. Rt #2, Box 216 1601 S Dupont Blvd. Elmer, NJ Milford, OE 609-358-8528 302-422-4837 ERB& HENRY EQUIP., INC. 22-26 Henry Avenue New Berlinville, PA 215-367-2169 March futures price by the cost ot shipping gram to Chicago plus the carrying charge for storing grain from January to March. (If freight cost is 30 cents a bushel and carrying charges are 4 cents a month, the local cash price in January might be below the March futures price by a total of 38 cents a bushel.) Local cash prices aren’t always less than futures prices. In some areas of the country that enjoy a location advantage in relation to Chicago, cash prices are frequently of even consistently higher than futures prices. The amount of the advantage in any given month is, as in any other community, affected by storage costs. For example, if in. January the local cash price is 20 cents over the July futures price and carrying charges are 4 cents a month, the local price in February may be 24 cents over the July futures pnce. And by March it may be 28 cents over the July futures price. What effect -does location on the cash price of grain? ROVENDALESUPPLY RD2, Watsontown, PA 17777 717-538-5521 I. A. SWOPE Box 121, RDI Myerstown, PA 717-933-4758 DETWILER SILO REPAIR Rt 2, Newville, PA 717-776-7533 Lancaster Farming, Saturday, November 14,1981—05 Differences in location—or, more specifically, differences in transportation costs due to location—are certainly the major reason gram prices differ from one location to another. If one could imagine a situation in which all transportation were free or in which the cost ot transportation were not related to distance, Uien the price of gram would be prac tically the same in every location. There would, of course, still be some differences such as possible premiums for faster delivery or higher quality. Or, m some other community, prices might be lower because farmers lack storage space and are anxious to sell. In the real world, however, it hardly needs to be said that transportation is not free and the cost of transportation is not unrelated to distance. Buyers seeking to purchase gram con tinuously take the cost of tran sportation into account m deciding what price to bid to one elevator versus their bid to another elevator. have As a result, sellers m some communities are at a definite disadvantage m terms of location and therefore in terms of price. They may, for example, be located a considerable distance from the nearest market where gram is used or assembled for export. Or IT’S MAGIC How quickly | You Get Results I From Our x^Classifieds! KATOLIGHT Solving Standby Power Problems... World Wide Ratability should ba foremost whan salactmg a Standby Powar Systam for any industrial application. Katolight Standby Powar Systams hava a provan record of dapandabla oparation throughout tha world. Katolight Corporation offers a variety of models to select from ranging in size from 2 KW to 1400 KW, gasoline, natural gas, liquefied petroleum gas or diesel fuejcd, 50, 60, or 400 HZ, 900 to 3600 RPM, with voltages from 12 VOCIo 6600 VAC. Katolight Control Systems provide instant response or any desired TUT HERSHEY EQUIPMENT INC. SYCAMORE IND PARK 255 PLANE TREE DRIVE Route iO West At LANCASTER, PA 17603 The Centerville Exit ' (717)393-5807 they may lack access to low-cost transportation. Or they may be at a disadvantage because their location does not give them a wide variety of marketing alternatives. In contrast, sellers in some other community may enjoy a location that enables them to choose bet ween several actively-competing markets for their gram. Or they may have an advantage because of several forms of inexpensive transportation. Or they may have both advantages. It should he noted that price differences due to location are subject to change. A location that is at a disadvantage at one tune may enjoy an advantage at some other tune. For example, assume a certain community m lowa nor mally ships its gram eastward for eventual processing or export and that the local price is typically lower than in communities which are close to these markets. Were there to be a suddenly short supply of gram m the Southwest and Far West, the ability to ship gram westward at a lower cost would, in all likelihood, be rapidly reflected m a higher price. Yesterday’s location disad vantage could become today’s location advantage. Send your questions on futures trading to Farming’s Futures, Lancaster Farming Newspaper, Box 366, Lititz, Pa. 17543. c) response to normal utility Kura failun. Many combinations of safaty features, ramota start, automatic trans fer, phase- selection, and others are obtainable through the control system. 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