016—Lancaster Farming, Saturday, December 12,1981
Farming’s Futures
By David K. Sauder
Commodity Advisor
Trade Tech, Lancaster
Where can price information be
obtained?
Along with the reports carried
each week in Lancaster Farming,
there are a variety of possible
sources.
For cash prices, check with your
local elevator. Or the local cash
price may be regularly published
in a newspaper or broadcast on
farm market reports.
Futures prices are published
daily m the Wall Street Journal
and most major newspapers as
well as many local newspapers.
Your local elevator manager
may maintain a recOrd of futures
prices and be able to prpvide most
or all of the information you need.
(Be sure the quality of the grain in
the cash quotation matches that
specified in the futures contract.)
With a little research you may
even be able to construct basis
records for the past year or two by
obtaining local weekly prices frofn
a nearby elevator and futures
prices from the elevator, a com
modity broker, or the grain
marketing specialist of the Ex
tension Service.
Because futures prices can, and
sometimes do, fluctuate widely
during the course of a single day,
you will need to decide on some
consistent method of choosing
which futures price to record.
Probably the best choice is the
closing futures price for the day.
For example, if the March
futures price on a particular day
ranged from a low of $2.18 to a high
of $2.26 and closed at $2.25, use
$2.25 to calculate the basis.
Mow helpful are basis charts?
They can often be very helpful in
that the basis and, just as im
portant, the basis pattern can be
seen at a glance. On the other
hand, if a tabular record of cash
prices,- futures prices, and the
resulting basis is easier for you to
maintain and use, it will provide
all of the information you need.
The choice is up to you.
With very little additional effort,
however, you may wish to keep
both a tabular record and chartd
for those months which are of
inters# to you.
~ There are several ways to plot a.
-Chart andthe only best way is
whichever why is best for you’.
Threp possibilities are worth
considering:
Plot actual cash and futures
prices on the same chart. The
difference between them is the
basis. This approach has the ad
vantage of Showing dollars and
■ cents price levels as well as the
basis. The disadvantage is that
variations in the basis may not be
as readily apparent.
o- Plot the local cash price in
cents per bushel below (or above)
the futures price. This doesn’t
show the actual level of prices, but
it does reveal even the smallest
fluctuations in the basis and basis
pattern at a glimpse.
o- Plot the futures price in cents
per bushel above for below) the
local cash price. This method has
the advantage that the basis for
several different futures delivery
months can be plotted on the same
chart.
lacks off membership campaign
THORNDALE - “We now have
573 paid-up members in the
Chester/Delaware Farmers’
Association for 1982,” reported
Janet Robinson, membership
coordinator, Oxford, during the
farm organization’s kick-off rally
held last week at the Thorndale
Inn.
Why is a knowledge of local basis
necessary In order to hedge?
A knowledge of basis is' 1
necessary in order to translate a'
given futures price into a probable
price for local delivery.
They futures ■ price minus the
basis is, in effect, the price the
futures market is offering for your
gram delivered at a local elevator
during a particular month. This
process is known, appropriately,
as “localizing” the futures price.
For example, assume that
during December the - March•
futures price is $2.25. Because you
would Idee to store your crop for
several months but are concerned
about the possibility of a price
decline, you are considering ■
protecting yourself against such a
decline by selling a March futures .
contract. That is,by hedging. ■
- First, though, you need to know
what the March futures price of
$2.25 is likely to mean to you in
terms of a price for your com
delivered locally in March. If you
know that the normal basis in your
area during March is about 25
cents, you can quickly calculate
that the futures market is offering
you approximately $2.00 a bushel
for corn to be delivered locally
during March.
An ability to rapidly translate
futures prices into prices for local
delivery is essential in order to .
hedge effectively and in order to
decide whether and when to hedge.
The more information you have at
your fingertips about your usual
local basis at various times of the -
year, the better equipped you will
be to make the kinds of decisions
that turn out to be right decisions.
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Chester/Del. Farmers’ Assn.
“This is a larger membership
sign-up than last year at this
time,” she pointed out.
Joyce Hershey, CochranviUe,
and tom Merroth, GuthriesviUe,
co-chairmen of the drive an
nounced 834 members is the goals
for 1982. They said they expect to
exceed this by at least four per
cent.
Art Hershey, CochranviUe, was
the moderator for the rally. He
.introduced Mitch Edftards, Ox
ford, insurance representative;
Eugene McDowell; Lincoln
University, marketing speciaUst;
Ed Taczanowsky; regional
organization directory and Leon
Wilkinson, Landenberg, legislative
committee chairman. They listed
soirie of the accomplishments of
Farmer’s Association '. for , its
members as well < as .ac
complishments for the agricultural
community. ■ • :
■Taczanowsky, pointed 'put that
two percent of the population in, the
U.S. are fanners, “Tliis means
that i ninety-eight percent t of the,
; population to .work at
•whatever they choose. -They do not
have to grow -their N own food K
produce their own. cottdn arid.
wool,” he said.,' ' ’'
McDowell noted that'there are
now 130 certified retail farm
markets across Pennsylvania. _
“Through,7the efforts of-,the
Pennsylvania Farmers’
Association, these markets have
been able to add supplies and other
"oduct lines for sale to retaU
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customers. These additional sales
help the fanner’s market become
profitable enough so that they can
stay in business,” he .said. “Over
one and a half' million dollars
worth of Pennsylvania grown foods
have been sold through these
programs. Customers can pur
chase local grown produce directly
from farmers at a savings,"
McDowell concluded.
Edwards told the group that the
federal government J is .pushing
crop insurance in connection with
their government loan .programs.
He said that any fanner with $l5O
or more of annual payroll must, by
law, carry workmen’s com
pensation insurance. Severe fines
can result is this is overlooked.
“Because of our record keeping
and documentation of the low loss
rat;es that Farmers’ .Association
members have, we have been able
to obtain two successive premium
reductions in workmen’s com
pensation insurance rates.
, These premium reductions have
been of benefit to all fanners, not
just .to Farmers’ Association
member,” Edwards noted.
' Wilkinson outlined a number of
legislative accomplishments and
objectives that Farmers’
Association is involved with. 3
Membership teams will be
contacting farmers in. the
Chester/Oelaware Co. area for
sign-ups during the coining month.
The final wrap-up meeting will be
held mJanuary.
PHONE
717-394-3047
or 717-626-1164
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